Montek Singh Ahluwalia reassures market after Indian rupee hits all-time low

Government policy is that they are not fixing an exchange rate. It has aligned the exchange rate to move with the market and RBI intervenes when it feels there is too much speculative pressure,he said at the Cabinet briefing here.

Terming this as a “temporary phenomenon”,he said “what you have seen is not a behaviour of the rupee”.

“You are seeing the behaviour of all emerging market countries against a great deal of global uncertainty triggered as it happens in this case because of statements made by the Federal Reserve,” he said.

“If you open any American newspaper,international newspaper…what you find is… markets behaved in a surprised way in response to the statement made by the Chairman of the Federal Reserve,” he said.

Yesterday,Federal Reserve Chairman Ben Bernanke had said that the US Fed may start scaling back its monetary stimulus programme later this year.

Following the statement,the US dollar strengthened against major currencies. The rupee hit a life-time low of 59.93 to a dollar in early trade today. It later recovered ground and was trading at around 59.7 levels in noon trade.

“Don’t get hung up on it touching 60,it has come down again… you need to look at how much volatility there is… I agree with you that no economy can take excessive exchange rate volatility,” he said.

Asserting that it is not just rupee that has seen downward slide,he said South African,Brazilian and Mexican currencies have depreciated against US dollar. South Africa has depreciated much more than Indian currency.

“We have probably depreciated more than other South East Asian countries. The reason for that is that India has a relatively large current account deficit,” he added.

However,Ahluwalia said,Indian economy is looking better than it was 4-5 months ago. When Fitch upgraded rating,people read that to be an endorsement that Indian economy is indeed looking better,he added.

“I believe that’s correct. But a day when there is a global volatility,you don’t expect the rupee to remain unaffected. And focussing on dollar rate is not perhaps the most appropriate thing because virtually everybody has depreciated against the dollar,” he said.

On the price rise,Ahluwalia said: “Government places highest importance on bringing inflation under control. Inflation rate is coming down. Gradually reduction is taking place.” PTI DP NKD KKS CS KSR 06201522