Indonesia says New York Fed to provide $60bn credit line

Bloomberg

Indonesia’s central bank said the New York Federal Reserve will provide it with a $60 billion repurchase facility to help with liquidity needs amid a dollar shortage triggered by the coronavirus outbreak.
Bank Indonesia has no plan yet to use the facility, Governor Perry Warjiyo told investors on a conference call. The agreement on the credit line was a vote of confidence in the domestic economy, he said.
The rupiah has been the hardest hit in Asia this year, dropping more than 14% against the dollar, as investors pulled money out of emerging markets and fled to the safe-haven greenback, triggering liquidity shortages. Bank Indonesia has taken aggressive steps to stem the fallout, draining $9.43 billion from its foreign reserves last month, according to figures.
Indonesia’s reserves of about $121 billion are ample and the Fed’s credit line was a “second line of defense in case we need liquidity in dollars,” Warjiyo said.
The Fed said March 31 it was setting up a temporary repurchase agreement facility for international monetary authorities to help support financial markets. The facility allows central banks to temporarily exchange their US Treasury securities held with the Federal Reserve for US dollars.
The rupiah and bonds rallied on the news of the repo facility. The currency rose as much as 1.3% to 16,200 to a dollar, the most since March 27, while the yield on benchmark 10-year rupiah sovereign bonds fell 4 basis points to 8.16%, the first decline in seven days.
“This will help improve liquidity for Indonesia and help beef up any budget deficit in the short term,” said Mingze Wu, a foreign exchange trader at INTL FCStone in Singapore. “However, long term we still need to see a turnaround in covid-19 infection for longer-term rally in the rupiah.”