Array

JAKARTA, June 9 (Reuters) Indonesia's vice president and the central bank on Friday played down concerns over a slump in the rupiah, which has fallen more than 8 percent in the past month.

Vice President Jusuf Kalla said the rupiah, which dropped to a four-and-a-half month low around 9,455 per dollar earlier on Friday, ''is not weakening'' because it is still stronger than the exchange rate target in the budget.

The central bank said there was ''nothing to worry about.'' The rupiah is being sold off as investors target emerging markets amid worries that U.S. interest rates will rise at the end of the month despite signs the world's biggest economy is slowing down.

''The rupiah is not really weakening because (the target rate) in the state budget is 9,700 per dollar, so it's too strong if the rupiah hovers around 9,000,'' Kalla told reporters.

He did not elaborate.

Indonesia's budget usually targets an average rupiah rate against the dollar.

Kalla did not say if he was referring to a proposed rupiah budget target because the existing budget is based on the rupiah averaging 9,900 per dollar in 2006.

But government officials have said they are currently in the process of revising budget assumptions, which could possibly include the rupiah after market volatility this year.

Officials at the vice presidential office were not immediately available for comment.

The Indonesian currency has lost more than 8 percent since hitting a two-year high of 8,685 on May 11 as foreign investors sold the stocks and high-yielding bonds that they had bought earlier and repatriated the proceeds into dollars.

But it is still more than four percent higher than at the start of the year.

The outspoken Kalla, who comes from South Sulawesi province, a major source of commodities for exports, has a broad brief from President Susilo Bambang Yudhoyono to oversee economic policy but his views do not always reflect those of economic ministers.

Separately, Bank Indonesia Deputy Governor Aslim Tadjuddin said the weakening in the rupiah was in line with global trends.

''We have to monitor (the rupiah) movements carefully, but there is nothing to worry about because the previous gains in the emerging markets had been mostly due to short-term capital inflows,'' he told reporters.

Tadjuddin reiterated the central bank will intervene if necessary.

Another central bank deputy governor, Hartadi Sarwono, told Reuters on Thursday the weakening of the rupiah will be temporary as the country's growing foreign exchange reserves will stabilise the currency.

Sarwono said the recent capital outflows were ''not large'' and estimated the amount last month at around $1 billion. He said the outflows were largely a result of foreign investors selling short-term debt.

REUTERS PV PM1721