Panic in market about rupee "unwarranted'': Finance Ministry
With rupee plunging to life-time low of 57.54 verus dollar, the Indian Finance Ministry said there is an unwarranted panic in the market and hoped it will settle down in a some time.
"If you see weakening of all currency vis-a-vis dollar, rupee is also not unaffected in that sense. But I think this is panic (in) the market which is unwarranted," Economic Affairs Secretary Arvind Mayaram told reporters on sidelines of a workshop here.
This, he said, started off with misinterpretation of what Federal Reserve Chairman Ben Bernanke had said in terms of Quantitative Easing (QE) recently.
"They have now more than clarified that this (Quantitative Easing) is not imminent neither it is going to something which will happen quickly. I think this will settle down in a while. We should not worry but we are watching the situation closely," he said.
Chief economic adviser Raghuram Rajan, who was also present at the event, said the weakness in rupee could be a temporary phenomenon.
"India has large CAD, and currencies of emerging markets (with) large CAD have depreciated more. This could be temporary phenomenon. But again let me reiterate government is not supportive of weakening of rupee and we would like more stability," he said.
He, however, added that the government does not have specific level in mind where rupee should be at.
Last week Finance Minister P Chidambaram, too, had said there was no cause for alarm and the currency would soon find its stable level.
The rupee today plunged by 48 paise to hit its life-time low of 57.54 in early trade on heavy dollar demand and dollar gaining overseas on better-than-expected US jobs report. This crossed its previous all-time closing low of 57.32 touched in June-end last year.
Rajan further said the medium-term measures which have been taken in past will continue and that will help rupee to find a level consistent with the sustainable growth.
Among other steps, both the government and RBI have taken steps to curb gold import in wake of widening CAD, which in turn puts pressure on rupee value.
Supported by portfolio capital inflows and various reform measures announced during the period, the rupee remained strong during December 2012 to early-February 2013.
However, the rupee witnessed some weakness during the second week of February to early March and saw subsequent appreciation during April 2013. Rupee started its downward journey against the dollar in May and hit 11-month low levels.
Federal Reserve Chairman Ben Bernanke had talked about scaling back of monetary stimulus with improvement in economic conditions in the US.
The announcement caused worry in the entire Asian region as this stimulus, or QE, had made foreign funds attracted to emerging markets, including India and cutting down on this might dry up capital inflows.