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February 4, 2025 | 05:10 pm
TEMPO.CO, Jakarta - The Rupiah exchange rate strengthened in trading on Tuesday, February 4, 2025, after weakening the previous day. The rupiah closed at Rp16,351 per U.S. dollar, appreciating 97 points compared to the previous closing rate of Rp16,448.
Currency analyst Ibrahim Assuaibi stated that the rupiah initially strengthened by up to 105 points before correcting slightly ahead of the closing session.
He explained that the Rupiah's strengthening this time was influenced by the weakening of the U.S. dollar index, which was affected by the dynamics of U.S. trade policy. "The postponement of trade tariffs on Canada and Mexico has provided room for risk sentiment to improve, which has also contributed to the weakening of the US dollar," he said on Tuesday.
However, Ibrahim cautioned that volatility still looms over the Rupiah, especially as U.S. President Donald Trump's tariff policies against China remain in place. It is known that Trump plans to speak with President Xi Jinping shortly, but the 10 percent tariff on Chinese goods is still scheduled to take effect this week.
On the other hand, the Federal Reserve's (The Fed) interest rate policy, according to Ibrahim, remains a key factor that could hinder the strengthening of emerging market currencies, including the Rupiah.
The U.S. central bank has signaled caution in cutting interest rates, especially after last week's strong Personal Consumption Expenditures (PCE) price index inflation data. Fed officials affirmed that persistently high inflation could slow down plans for monetary policy easing.
Domestically, Ibrahim revealed that the Rupiah's strengthening was also supported by solid economic performance. Indonesia's Manufacturing Purchasing Managers’ Index (PMI) at the beginning of 2025 rose to 51.9 from 51.2 in December 2024. The increase in production and new orders, both from domestic and international markets, was the main driver of the sector's expansion.
Additionally, household consumption indicators showed a positive trend. Bank Indonesia's Consumer Confidence Index (CCI) stood at an expansionary level of 127.7 in January, up from 125.9 in the previous month. Meanwhile, inflation declined to 0.76 percent year on year (YoY) compared to 1.57 percent in December 2024. Monthly, there was a deflation of 0.76 percent due to a government electricity tariff discount program, although the prices of some food commodities rose due to the rainy season.
The government has stated that it will continue to keep inflation under control through coordination between central and regional authorities, including the Central Inflation Control Team (TPIP) and the Regional Inflation Control Team (TPID).
For trading on Wednesday, February 5, 2025, Ibrahim predicts that the Rupiah will remain volatile but is likely to close stronger within the range of Rp16,300 - Rp16,360 per US dollar. "External and internal sentiments remain quite mixed, so the rupiah's movement will still be influenced by global dynamics and domestic economic policies," Ibrahim said.
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