China and Japan are no longer alone in their unofficial quest to pile up foreign exchange reserves. Indonesia just announced that its reserves have surpassed the $45 Billion mark, and to the surprise of no one, these reserves are largely held in USD-denominated assets. The announcement is significant for a few reasons. First, it means that Asian nations not lumped in with the Asian Tiger economies – Taiwan, Hong Kong, South Korea, and Singapore – have begun to reap some of the fringe benefits of economic growth, notably surging forex reserves. Second, it is symbolic of the fact that the USD remains the world’s de facto reserve currency. At the same time, it should make USD bulls quiver, because such countries could conceivably pile out of the USD just as quickly as they have piled in.

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