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Updated: June 12, 2012 15:17 IST

Pranab hints at steps to quell rupee volatility

Special Correspondent
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Pranab Mukherjee. File photo
Pranab Mukherjee. File photo

Even as the rupee has been slipping to new lows against the dollar in recent weeks owing to a combination of negatives factors at home and abroad, Finance Minister Pranab Mukherjee, on Tuesday, said the government was taking a series of steps to contain the volatility in the foreign exchange market and the Reserve Bank of India would step in to intervene as and when necessary.

“The government is taking a series of steps. However, managing [the] rupee is market-related ...There is a lot of volatility. As and when the RBI will consider necessary, it will intervene. It depends on the market forces and market forces are uncertain,” Mr. Mukherjee told the media here.

The Finance Minister was responding to all-round concern over the rupee breaching the psychological 55-mark against the greenback following a sustained pull-out by foreign institutional investors (FIIs) from emerging markets, including India, as part of their global risk aversion strategy and seeking safer havens in the U.S.

Aggravating the situation for India further has been a widening trade and current account deficit (CAD), a high fiscal deficit coupled with rising inflation and concerns over tax on foreign investors. Not without reason, therefore, that the rupee slumped to a new low of 55.47 during the day's trade and closed marginally higher at 55.39 against the dollar.

Such has been the demand for the U.S. currency from importers, especially oil refiners, that the Indian rupee has turned out to be one of the worst performers among other Asian currencies, touching fresh lows in the last couple of weeks. And this has been despite interventions by the RBI to contain the extreme volatility in the forex market.

In a written reply to the Rajya Sabha on the causes for the free fall of the rupee and its impact on the economy, Mr. Mukherjee sought to pin the blame on the global slowdown owing to the eurozone crisis and assured the House that steps were being taken to tackle the situation.

“Global slowdown due to unfolding of eurozone sovereign debt crisis has, inter-alia, impacted the Indian economy,” he said.

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The correct evaluation of rupee is 60 per US dollar. This would justify the current inflation level. when inflation is swelling out of control appreciation of foreign currency I believe is normal. why not the govt focus on inflation.

from:  Nathan
Posted on: May 23, 2012 at 07:30 IST

pranabda pins the blame for rupee volatility on Global slowdown owing to Eurozone crisis. Is he telling the Indians that this affects only Indian currency and not other currencies which have not depreciated so badly. secondly it appears there is a disconnect between UPA Report card and Pranabda's statements. It is time UPA Ministers and the congress speak in one voice. Indians have had enough and more patience. UPA needs to realise this. I don't think they can ever dream of coming back to power for another two decades. Indians should never forgive them for what they have done to Indian economy.

from:  vijayalakshmi
Posted on: May 23, 2012 at 05:10 IST

@Finance Minister: why is rupee the worst performing currency in Asia? What is preventing other currencies from falling at the same rate as rupee? Is it solely because of Eurozone crisis? What is going to happen if rupee continues with its fall with ever expanding trade deficit and current account deficit? Is another BoP crisis is near with India's rapidly depleting foreign currency reserves.
Curious minds seek answer! I hope FM ensures India has enough gold reserve when the time comes to borrow from IMF/World Bank with gold as the collateral like it was in 1991 BoP crisis.

from:  Jitendra Dutta
Posted on: May 22, 2012 at 17:48 IST
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