April 23, 2025
Potential Rupiah Strengthening

Market Commentary
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Trade surplus leads to increased demand for the country's currency, as foreign buyers need to convert their own currencies to pay for these exports. As demand for the currency rises, its value tends to strengthen. Therefore, a sustained trade surplus often correlates with a stronger currency, as it reflects both healthy external demand and steady capital inflows.

For example, Germany and China have historically run large trade surpluses, which have contributed to the relative strength of the euro and Chinese yuan (especially before China's heavy intervention).
 
USD / CNY Performance


Indonesia's trade balance booked a robust surplus of USD4.33 bn in March, higher than USD3.12 bn surplus in Feb-25. This figure came in higher than our estimate of USD4.00 bn and consensus forecast of USD2.64 bn. This marks the 59th consecutive month of trade surplus.

Key commodities' exports continues to increase except for coal. China's recent positive economic activity is reflected by the increase in exports value to China which increased 21.49% MoM and 9.51% YoY. Meanwhile, exports to the US increased in March amid ongoing tariff concerns (20.06% YoY and 12.08% MoM). The continuous decline of oil price is likely to help Indonesia maintain trade surplus going forward. Note that WTI oil price has dropped 7.0% in April.
 

We believe latest trade balance should provide a catalyst for rupiah to strengthen. A persistent surplus reflects sustained demand for domestic output, putting upward pressure for the rupiah to appreciate against US dollar.

Having said that, we urge investors to remain cautious as the geopolitical turmoil remains unsteady and may unveil an unexpected downturn to macroeconomics data.

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