Rupiah’s Recent Performance

On Friday, the Rupiah closed at Rp 16,795.5 per US dollar, marking a 0.16% increase (27.5 points). This follows a similar upward trend observed on Thursday, where the currency appreciated by 0.29% (49.5 points) to close at Rp 16,823 per US dollar. Concurrently, the dollar index experienced a decline of 1.23%, settling at 99.6.

The Shadow of a US Recession

Growing apprehension about a potential US recession is a primary driver behind the Rupiah’s strengthening. These concerns are fueled, in part, by escalating trade disputes between the United states and China. The imposition of tariffs by both nations has created uncertainty in the global market.

“Although Trump postponed a reciprocal trade tariff plan for other countries for 90 days, a trade war with China still has the potential to have a terrible implication for American importers and exporters,”

Currency Analyst Ibrahim Asssuaibi

The US still relies on China for certain essential materials, and the tariffs could disrupt supply chains and increase costs for American businesses. This situation is further compounded by recent US consumer inflation data for March, which fell below projected figures, leading some to speculate that the Federal Reserve might accelerate interest rate cuts to mitigate economic pressures stemming from the trade war.

Impact of Trade Tensions

The trade war between the US and China continues to cast a long shadow over global markets. The tit-for-tat tariff implementations,such as the US raising tariffs on china to 145% and china imposing tariffs of 84% on US goods,have heightened investor unease. These measures have the potential to disrupt international trade flows and negatively impact economic growth.

For context, the World Trade Organization (WTO) projects that global trade growth will slow to 1.7% in 2025, down from 2.7% the previous year, citing trade tensions as a major contributing factor.

China’s Currency Strategy

In response to the trade war, there is widespread anticipation that china may allow its currency, the Yuan, to depreciate further.A weaker Yuan would make Chinese exports more competitive, perhaps offsetting some of the adverse effects of the tariffs. This strategy, however, could further escalate tensions with the US, which has long accused China of currency manipulation.

Internal Economic Factors in the US

Adding to the dollar’s woes are concerns about the overall health of the US economy. Decreasing US Treasury prices, reflecting doubts about the economic outlook under the current management, are also exerting downward pressure on the dollar.

“However, the central bank has taken a very careful attitude towards Trump’s policy. Decreased US Treasury prices, amid the doubts over the US economy under Trump, also adding pressure on the dollar,”

Currency Analyst Ibrahim Asssuaibi