Tuesday, 04 December 2018 00:00

Impact of Decreased Trade War on Strengthening Rupiah

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Coordinating Minister of Economic Affairs, Darmin Nasution said that Rupiah has a chance to continue to strengthen after the pressure of a trade war between the United States of America -USA and China began to decrease. This was stated by Minister Darmin in the CEO Networking 2018 in Jakarta, Monday (3-12).

Compared to other developing countries, Minister Darmin also remarked that Rupiah undergoes the fastest increase. In fact, the strengthening of the Rupiah is better than ASEAN countries and other countries' currencies, such as Brazil, India, South Africa and Turkey.

At the opening of the trade this week, Rupiah appreciated against the US dollar. The Rupiah exchange rate which had fallen in the range of Rp. 15,000 per US dollar. This week, it opened higher to Rp. 14,270 per US dollar. Positively, the meeting of US President, Donald Trump and Chinese President, Xi Jinping became one of the triggers. As reported by CNBC on Sunday (12/02/2018), the two leaders agreed that no additional tariffs will be imposed after the upcoming January 1, 2019. This is what is believed to make the trade war subside.

The trade war between the US and China began when the United States threatened the application of tariffs on imported goods to China. The US administration under the leadership of Donald Trump imposed a tariff on import of Chinese goods worth US$34 billion dollars on July 6, 2018. At that time, President Donald Trump threatened to increase trade conflicts with plans to implement tariffs up to US$450 billion for Chinese goods if China countered US policy. That sentiment had put pressure on financial markets, including stocks, currencies and global trade.

The decreased tension of trade war, besides having the potential to strengthen the Rupiah exchange rate against the US dollar, is also expected to re-launch the implementation of the Indonesian government's economic policy program to make improvements, such as improving infrastructure quality, human resources and land redistribution. With the strengthening of the value of the Rupiah against the US dollar, Indonesia's economic system becomes very stable; prices of basic commodities could be reached by all people. And hopefully, the increasing value of Rupiah will show promising signs for Indonesia's progress.

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