Indonesia central bank says in discussion with Fed for possibility of swap, repo lines

Author: Justin Low | Category: Central Banks

The dollar squeeze in emerging markets is where the problem is at

Indonesia is one of the EM countries where they have higher dollar-denominated debt than they do FX reserves. That is not a good spot to be in during this kind of market environment.

The swap lines offered by the Fed is good to address the needs by local banks on the receiving end as they start to run empty on dollars.

However, the true value of the Fed's liquidity measures relies on how banks can also help get these dollars to corporates for their working capital requirements or cash buffers.

How effective is all of this remains to be seen but at least there is no reoccurrence of the dollar panic that we saw a few weeks back so that is something I guess.

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