Rupiah Predicted To Strengthen Driven By Donald Trump's Trade Tariff Delay

Illustration (Photo: Doc. ANTARA)

JAKARTA - The rupiah exchange rate in trading Wednesday, February 5, 2025 is expected to move higher against the United States (US) dollar.

To note, citing Bloomberg, on Tuesday, February 4, 2025, the rupiah spot exchange rate was closed up 0.59 percent to the level of Rp. 16,351 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.59 percent to a price level of IDR 16,365 per US dollar.

Currency Observer Ibrahim Assuaibi said the postponement of plans to impose trade rates on Canada and Mexico had weakened the dollar index which had an effect on the strong rupiah. However, the increase in regional currencies is limited, considering the tariff of 10 percent on China will still apply in the future.

"Both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum said they had agreed to strengthen border law enforcement efforts in response to Trump's demands to take firm action against immigration and drug smuggling," he said in his statement, quoted Wednesday, February 5.

Ibrahim said in addition to temporarily suspending tariffs by 25 percent for 30 days, with a 10 percent tariff for energy imports from Canada, which has been set to take effect on Tuesday.

"While tariff delays for Mexico and Canada have provided room for risk sentiment to improve and contribute to the weakening of the US dollar," he said.

Then specifically for China, Trump plans to talk to Chinese President Xi Jinping as soon as this week, the White House said, as 10 percent import duty for all Chinese goods goes into effect on Tuesday.

In addition, persistent concerns over high US interest rates for a longer period of time, especially after strong PCE price index inflation data from last week.

"The Federal Reserve has hinted that strong inflation will reduce the push to continue to cut interest rates. Fed officials are also marking the reluctance to relax policies amid uncertainty over Trump's policies," he said.

Meanwhile, from within the country, the Indonesian Manufacturing Purchasing Managers' Index (PMI) in early 2025 again recorded solid performance with an expansion at the level of 51.9, an increase of 1.37 percent from December 2024 at the level of 51.2. The increase in production and demand for new products from both domestic and foreign markets encourages this increase.

The increase in manufacturing PMIs is a positive signal starting in 2025.

This momentum will continue to be maintained, the Government is committed to maintaining real sector performance and supporting pro-industry growth policies.

The development of the manufacturing sector in January 2025 reflects a consistent expansion of consumption activity and the business world since the end of last year. In December 2025, the real sales index (IPR) increased 1.0 percent on an annual basis (November: 0.9 percent) and consumption indicators, namely the consumer confidence index (IKK) released by Bank Indonesia, which was expansive at the level of 127.7 (November: 125.9).

Meanwhile, inflation in January 2025 was recorded to have fallen to 0.76 percent (yoy) lower than in December 2024 by 1.57 percent.

In the month to month, there was a deflation of 0.76 percent (mtm), mainly driven by the electricity tariff discount program amid the increase in the prices of several food commodities due to the rainy season.

The government continues to strive to keep inflation under control to support the maintenance of people's purchasing power, especially ensuring food access.

The government is committed to maintaining inflation at the target interval with support for central and regional coordination through TPIP and TPID.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Wednesday, February 5, 2025, in the price range of IDR 16,300 - IDR 16,360 per US dollar.