Currency Analysts Link Rupiah Recovery to Trump's Postponed Tariffs

TEMPO.CO, Jakarta - Analyst at Bank Woori Saudara, Rully Nova, believes that the postponement of the implementation of import tariff policy, known as Trump's tariffs, by U.S. President Donald Trump has influenced the strengthening of the rupiah exchange rate.

"Today, the rupiah is expected to close stronger at the range of Rp16,775-Rp16,870, influenced by global factors, namely the postponement of tariffs by President Trump," he said on Thursday afternoon, April 10, 2025, as quoted from Antara.

Trump announced that more than 75 countries will be given a 90-day suspension from the deadline on Wednesday, April 9, 2025, local time, which were previously subject to higher tariffs of more than the base limit of 10 percent. In some cases, the tariffs could be much higher.

The suspension, Trump said, was given because these countries had contacted their partners in the U.S. to find solutions on trade issues, trade barriers, tariffs, currency manipulation, and non-monetary tariffs.

Furthermore, Trump added that these countries did not take any retaliatory action against the United States in any form.

Meanwhile, for domestic factors, positive sentiments come from the low inflation level at 1.03 percent on a year-on-year (yoy) basis in March 2025, and the expectation of a decrease in interest rates by Bank Indonesia (BI).

"There is ample room for BI to lower the interest rate because inflation is still very low. The fundamental reason is more about maintaining growth momentum to avoid economic stagnation," said Rully.

On the other hand, the rupiah exchange rate at the opening of trading on Thursday morning in Jakarta strengthened by 40 points or 0.24 percent to Rp16,833 per US dollar from the previous Rp16,873 per U.S. dollar.

Several reasons have been cited for the recent weakening of the rupiah, according to financial analysts and economic observers. Here's a breakdown of the main contributing factors:

Danantara

Currency analyst, Ibrahim Assuabi, said that the sentiment influencing the movement of the rupiah comes from domestic and global factors.

Domestically, the rupiah value is affected by the establishment of Danantara and statements by President Prabowo Subianto, stating that stocks are a form of gambling or stating that the decline in IHSG is not related to the lower class society.

These Danantara and Prabowo's statements have made investors worried and frustrated, leading to a substantial outflow of foreign funds from the Indonesian capital market.

"On the other hand, the establishment of Danantara through the previous administration has caused foreign entities to exit again, as they do not want the government to intervene in the capital market. They see that the government may intervene, and even the national police's criminal investigation department (Bareskrim) made a statement to oversee the capital market," he said.

Trump Tariffs

The import tariff policy announced by U.S. President Donald Trump on Wednesday, April 2, 2025, has sparked widespread concern globally, including in Indonesia.

Dubbed a “reciprocal tariff” policy, Trump declared that a base tariff of 10 percent would be applied to all imported goods, with significantly higher tariffs for countries deemed to have unfair trade practices with the U.S. Indonesia is among those affected, facing a steep tariff of 32 percent.

Ramdan Denny Prakoso, Director of the Executive Office of Bank Indonesia's Communication Department, said that the U.S. tariff policy, along with China’s retaliatory tariff measures announced on April 4, 2025, has triggered instability in global financial markets.

“Pressure on the rupiah emerged in the offshore or Non-Deliverable Forward (NDF) market, coinciding with the domestic market closure during the Idul Fitri 1446H holiday,” Ramdan noted in an official statement on Monday, April 7, 2025.

Meanwhile, the U.S. Federal Reserve's cautious stance on interest rate cuts has helped limit pessimism in financial markets. Investors are also closely following developments in Ukraine, where U.S. and Russian officials recently wrapped up a one-day meeting on March 24, 2025, focused on a limited ceasefire at sea between Kyiv and Moscow.

On a related note, financial analyst Ibrahim explained that several economic indicators contributed to the strengthening of the U.S. dollar. “For instance, U.S. employment data exceeded expectations,” he said in a statement on Sunday, April 6, 2025.

Ibrahim also attributed the dollar’s gain to the Federal Reserve’s testimony on Friday night, during which the Fed signaled that interest rate cuts are unlikely in the near term. Cutting rates now, he said, would be premature, especially given the ongoing global economic uncertainty and persistent inflation.

Ida Rosdalina, Ervana Trikarinaputri, Myesha Fatina Rachman, Anastasya Lavenia Y, Salsabilla Azzahra Octavia, Dinda Shabrina, and Ilona Estherina contributed to the writing of this article.

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