TEMPO.CO, Jakarta - The Indonesian rupiah has started to regain ground amid signs of easing trade tensions between the United States and China, analysts said Friday, May 2. Rully Nova, an economist at Bank Woori, attributed the rupiah's strengthening to improved global sentiment following a thaw in tariff disputes between the world's two largest economies.
"The rupiah is expected to close stronger today, in the Rp16,550–Rp16,450 range, driven by cooling global tensions — particularly China's softer stance and willingness to reopen trade talks with the U.S.," Rully said, as quoted by state news agency Antara.
According to Rully, China's readiness to return to the negotiating table stems from its ongoing reliance on U.S. industrial raw materials. He also noted that China's economic recovery remains heavily dependent on exports, as its domestic property sector has yet to bounce back from previous downturns.
"There are no winners in a tariff war — both the U.S. and China end up losing," he said.
Looking ahead, Rully expects the two countries to forge a mutually beneficial relationship in trade and investment, which could help stabilize market sentiment further.
On the domestic front, Indonesia's Central Statistics Agency (BPS) reported a monthly inflation rate of 1.17 percent in April 2025 — a sign that the recent deflationary trend may have run its course, as the broader economy shows signs of entering an expansionary phase.
"This gives Bank Indonesia some room to cut its benchmark interest rate," Rully added.
However, not all analysts share the same optimism. Lukman Leong, a currency and commodity strategist at Doo Financial Futures, warned that the rupiah could weaken following remarks by U.S. President Donald Trump, who suggested that tariff agreements with multiple trading partners were in the works.
"The rupiah may depreciate as the US dollar strengthens broadly in response to Trump's comments on potential deals with India, South Korea, Japan, and China," Leong said.
Such agreements could help the U.S. stave off a recession, but analysts remain cautious. Adam Posen, president of the Peterson Institute for International Economics (PIIE), recently placed the odds of a U.S. recession at 65 percent, citing policy uncertainty as a key risk.
Gary Clyde Hufbauer, a non-resident senior fellow at PIIE, echoed that view, predicting a likely recession in the second half of 2025. He pointed to weakening consumer sentiment and growing business uncertainty, which are expected to weigh on second-quarter GDP growth.
The Kobeissi Letter, a financial publication, reported that the US economy contracted by 0.3 percent in the first quarter of 2025 — well below market expectations of 0.3 percent growth. This marked the first and steepest contraction since the second quarter of 2022 and has heightened concerns that a recession is now the base-case scenario for the rest of the year.
"Investor focus has shifted toward tariff developments," Leong noted.
Back in Jakarta, the rupiah briefly weakened at the start of Friday's trading session, slipping 25 points or 0.15 percent to Rp16,602 per US dollar from Rp16,577. But by the close of the day, the currency had rallied, gaining 139 points or around 0.84 percent to end at Rp16,438 per dollar.
Similarly, Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) on Friday afternoon showed the rupiah strengthening to Rp16,493 per dollar, up from Rp16,679 the previous day.
As of Monday, May 5, the rupiah climbed further to Rp16,406 per dollar, a 0.19 percent appreciation from the prior session. Most other Asian currencies also posted gains: the Thai baht rose 0.15 percent, the Malaysian ringgit strengthened 0.35 percent, and the Japanese yen edged up 0.16 percent.
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