The Fed's emergency reduction in interest rates twice in the last two weeks due to the increasingly rapid spread of the Covid-19 pandemic has caused the market to sell heavily in risky assets. Global investors' fear of uncertainty is triggering capital outflows from developing countries. The Indonesian portfolio has recorded capital outflows reaching USD8.1 billion since the spread of Covid-19 at the end of January. To anticipate the impact of the pandemic on the economy in the short to medium term, many central banks have attempted to maintain the liquidity of their banking systems at the same time as cutting their policy interest rates. BI itself has issued a stimulus package, including an injection of funds in the foreign exchange market and DNDF as well as a reduction in bank foreign exchange reserve requirements. However, “flight-to-safety” has weakened the Rupiah to around IDR 15.200 so far. The increasing risk aversion behavior of global investors has significantly reduced USD liquidity in the financial markets of emerging economies, including Indonesia.

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