IMF Indonesia rep says strong rupiah can help contain inflation

JAKARTA-
The appreciation of Indonesia's rupiah could help contain price pressure in Southeast Asia's biggest economy, the International Monetary Fund's senior resident representative in Indonesia said on Wednesday.

Milan Zavadjil, the IMF's representative, also told Reuters in an email that the central bank, Bank Indonesia (BI), was right to direct intervention to trying to reduce volatility in the rupiah, which is Asia's best-performing currency so far this year.

'In the current situation of strong capital inflows, the appreciation of the rupiah can help contain domestic price rises. BI is right to direct intervention largely at reducing volatility,' he said.

Zavadjil noted that the country's exchange rate flexibility has helped it in the past to deal with large capital flows.
'Exchange rate flexibility has served as an important shock absorber for Indonesia,' he said.
'During the worse of the global financial crisis, the flexibility of the currency helped absorb large capital outflows, thus avoiding a large loss in reserves and a loss in confidence.' October 14th 2009.