Rupiah Is Predicted To Strengthen, This Is The Driving Sentiment

JAKARTA - The rupiah exchange rate in trading Friday, February 21, 2025 is expected to move higher against the United States (US) dollar.

To note, citing Bloomberg, on Thursday, February 20, 2025, the rupiah spot exchange rate closed down 0.08 percent to the level of IDR 16,338 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.08 percent to a price level of IDR 16,344 per US dollar.

Currency Observer Ibrahim Assuaibi said that US President Donald Trump had announced a 25 percent tariff planned for cars, pharmaceuticals and semiconductors would be in effect in the coming months and also signaled a potential 25 percent tariff for all timber imports to the US.

" Trump's comments raise concerns that the increase in US rates will disrupt global trade and trigger a new trade war between the two countries and the world's largest economies," he said in a statement, quoted Friday, February 21.

In addition, the US President recently threatened to impose reciprocal rates on major trading partners.

However, Trump also said on Wednesday that trade deals with China were possible, although he recently imposed a 10 percent tariff on the country, sparking outrage and retaliation from Beijing.

Ibrahim said the Fed released its meeting minutes on January 28-29, showing caution among officials due to potential inflationary pressure arising from recent US trade and immigration policies.

The discussions highlight concerns that Trump's proposed rates could disrupt global supply chains, leading to increased costs and high inflation.

The uncertainty surrounding Trump's plans has raised their doubts about cutting interest rates by 2025.

Meanwhile, from within the country, Indonesia's Payment Balance (NPI) performance in the fourth quarter of 2024 increased compared to the third quarter of 2024.

Bank Indonesia (BI) noted that NPI in the fourth quarter of 2024 recorded a surplus of 7.9 billion US dollars, an increase compared to the previous quarter's surplus of 5.9 billion US dollars.

The overall NPI in 2024 recorded a surplus of 7.2 billion US dollars, an increase from the previous year which recorded a surplus of 6.3 billion US dollars. The increase in surplus was mainly driven by better capital and financial transaction performance.

Overall in 2024, the development of the NPI shows strong external sector resilience, amid the continuing uncertainty of global financial markets.

Meanwhile, capital and financial transactions in 2024 recorded a surplus of 16.4 billion US dollars, an increase compared to a surplus of 9.9 billion US dollars in 2023, supported by foreign capital inflows in direct investments and portfolio investments, amid continued global financial market uncertainty.

Furthermore, transactions running in 2024 recorded a deficit of US$8.9 billion or equivalent to 0.6 percent of gross domestic product (GDP), after recording a deficit of US$2.0 billion or 0.1 percent of GDP in 2023.

This development was influenced by a decline in the trade balance surplus in line with the weakening demand of major trading partner countries amid strong domestic demand.

The position of foreign exchange reserves at the end of December 2024 reached 155.7 billion US dollars, an increase from 146.4 billion US dollars at the end of December 2023.

The position of foreign exchange reserves is equivalent to financing 6.5 months of imports and government foreign debt, and is above the international adequacy standard of about 3 months of imports.

Ibrahim estimates that the rupiah will fluctuate, but close higher in trading Friday, February 21, 2025, in the price range of IDR 16,290-IDR 16,340 per US dollar.