The central bank said the current rupiah level would guard against inflation, while striking a balance between export and import activities, to help sustain economic growth.
"*A rupiah level of* 9,000 may not be attractive enough for investors, but *it's attractive* for import activities in particular and to guard against inflation," acting Bank Indonesia (BI) Governor Darmin Nasution said Friday.
"The point is we'll try to keep it. We won't let it to be volatile," he said. The rupiah continued to rise this year with surging capital inflows. Darmin said Indonesia's foreign exchange reserves surpassed US$77 billion as of April 29 because of the large capital inflows.
The currency is the best-performer in Asia over the past 12 months as overseas investors increased holdings of the nation's stocks and bonds.
The currency appreciated 1 percent to Rp 9,008 per dollar as of Friday 4:28 p.m. in Jakarta, from Rp 9,095 at the end of March, according to data compiled by Bloomberg. The rupiah has appreciated 17.4 percent in the past year and reached 8,989 on April 26, the strongest since July 2007.
A stronger rupiah will cut costs for importers, but it also means exporters have to sell their goods at cheaper prices.
Finance Minister Sri Mulyani Indrawati said a strong rupiah would curb imported inflation. "Overall we're still optimistic *full-year* inflation to be around 5 percent or below as targeted in the state budget," she said.
Darmin also said full-year inflation would be below 5 percent.
BI has kept its benchmark interest rate at 6.5 percent for the eighth straight month since September because of low inflation. Analysts expect BI will hold the rate when the board of governors meet next week because of low inflationary pressure.
Bank Danamon economist Helmi Arman predicted inflation in April rose 3.9 percent from a year earlier, rising from 3.44 percent in March. "We expect to see a month-on-month inflation rate of 0.13 percent," he said. Standard Chartered Bank economist Eric A. Sugandi said BI would maintain its rate at 6.5 percent until the fourth quarter this year as inflation was expected to remain manageable in the coming months.
"We expect a 25 basis points hike each in October and November," he said.
Mulyani said the end of the harvest season might mean rising commodity prices. "The pattern *of inflation* is similar. But if we look at the contributing factor of foods, we need to be careful because the harvest season has ended," she said.
