The rupiah exchange rate against the US dollar strengthened by 0.66% to reach the level of 16,173 on Friday, January 24, 2025. This indicates the ongoing strengthening over the last five days and recorded an appreciation of 1.17% week-on-week (WoW). In addition, the currencies of a number of other emerging market countries also showed strength against the US dollar over the past week, such as the Malaysian ringgit (+3.05% WoW), the Thai baht (+2.34% WoW), and the Philippine peso (+0.48% WoW).

Causes of Rupiah Strengthening

The strengthening of the rupiah exchange rate was driven by the easing of the risk of a trade war between the US and China. After US President Donald Trump said on Thursday (January 23) that he could reach a fair trade deal with China. Trump revealed that he had spoken with Chinese President Xi Jinping last week before he was inaugurated, and the conversation was good and friendly.

Trump also said he prefers not to impose import tariffs on China, though he stressed that import tariffs remain a powerful tool for the U.S. to gain more power over China. The statement came days after he announced he would impose a 10% import tariff on China starting February 1, 2025, arguing that the country has been marketing narcotics to the U.S. through Canada and Mexico.

At the time of his inauguration, Trump imposed a 25% import tariff policy for Canada and Mexico, while the threat of import tariffs against China this time felt more lenient than his campaign promise to impose import tariffs of up to 60% for China.

Currency Market Prediction

Market strategist at Krung Thai Bank, Poon Panichpibool, told Reuters that Asian currencies will strengthen and the yield on 10-year US government bonds is likely to stabilize or decline, as long as market participants remain optimistic that the Trump administration will not immediately implement a rate hike and that the amount of tariffs will not be as severe as previously feared.

The Importance of Monitoring U.S.-China Relations

For investors, it is necessary to monitor the development of the US-China relationship closely, as this issue has the potential to have implications for the US inflation and interest rate outlook. Therefore, the market is predicted to still tend to be volatile until there are more concrete developments.

Investments to Consider

For more conservative investors, one option that can be considered is short-term government bonds such as PBS003, which offer a yield of 6.61% per annum with a tenor of about 2 years. Meanwhile, investors with a higher risk appetite may want to consider stocks from big banks, such as $BMRI and $BBCA.

Conclusion

The strengthening of the rupiah exchange rate has again become a market spotlight, especially with a positive statement from the US President regarding trade relations with China. This should be an important concern for every investor to take strategic steps amid the uncertainty that occurs. By understanding these dynamics, investors are expected to be able to make smarter decisions in planning their investments in the future.