Rupiah Potentially Strengthens Along With Uncertainty Of US Trade Tariff Policy

Photo: Doc. Antara

JAKARTA - The rupiah exchange rate in today's trading, Thursday, January 23, is expected to move higher against the United States (US) dollar.

To note, citing Bloomberg, on Wednesday, January 22, the rupiah spot rate closed up 0.39 percent to the level of Rp. 16,280 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.02 percent to a price level of Rp. 16,327 per US dollar.

Currency Observer Ibrahim Assuaibi said the market was cautious after US President Donald Trump raised prospects for a fastest increase in trading rates in February.

"Trump said he could impose a 10 percent tariff on Chinese imports, citing concerns over the flow of illegal drugs, particularly fentanyls, from China to Mexico and Canada, and to the US. Trump also threatened a 25 percent tariff on Canada and Mexico," he said in his statement, quoted Thursday, January 23.

In addition, although the market initially saw a bit of relief from Trump who did not charge any tariffs on the first day of his term, his comments on Tuesday left fears of a trade war remaining.

However, Trump's 10 percent tariff threat to China is much lower than the 60 percent he threatened during his campaign. China is also expected to release more stimulus measures in the face of US trade barriers.

Meanwhile, from within the country, the Government will immediately revise Government Regulation (PP) No. 36/2023 concerning Export Result Foreign Exchange (DHE) from Business Activities, Management and/or Natural Resources Processing (SDA).

Ibrahim explained that in the new rules later, the government will impose 100 percent retention on DHE for the one year period.

"As an illustration, in the previous regulation, DHE's retention or detention was 30 percent with a minimum period of three months. DHE's new policy would apply equally to the private sector or BUMN, meaning that there would be no special treatment," he said.

In addition, DHE's 100 percent retention for one year has gone through comparisons with neighboring countries, such as Malaysia and Thailand.

On the other hand, the government also approved the provision of a number of incentives to exporters for the new DHE obligations that will be implemented.

One of them is the Income Tax Rate (PPh) exemption facility for interest income in the DHE placement instrument where regular tax is usually 20 percent, but for DHE 0 percent.

In addition to exemption from income tax rates, exporters can take advantage of DHE placement instruments as back-to-back collateral for rupiah credit from banks and Indonesian Export Financing Institutions (LPEI) for rupiah needs in the country.

Regarding the underlying of swap transactions between customers and banks, exporters can take advantage of swap instruments with banks in terms of having a rupiah requirement for their business activities.

Then, for foreign exchange swaps between banks and BI, exporters can ask banks to divert the exporter's DHE foreign exchange to BI's selling swap in terms of exporters requiring rupiah for domestic business activities.

Ibrahim estimates that the rupiah will fluctuate but close higher on trading Thursday, January 23, 2025, in the price range of IDR 16,220 - IDR 16,290 per US dollar.