NEW DELHI: As the Indian currency fell to a record low and breached the 80-mark against the US dollar, a top government official on Wednesday said it is not a big worry for India and the central bank is taking measures to contain the volatility in the rupee.
According to him, the rupee has appreciated significantly against other currencies such as the euro, British pound and Japanese yen, making imports in these currencies cheaper than in US dollars.
In order to encourage foreign exchange flows, the RBI recently raised the overseas borrowing limits for companies and relaxed norms for foreign investments in government bonds.
It had raised the external commercial borrowing (ECB) limit under the automatic route to $1.5 billion from $750 million, along with easing norms for foreign portfolio investments in the debt market.
Meanwhile, the official said the government has no plans to come up with special guaranteed FCNR (foreign currency non-resident account) deposits for 2013 on account of enough foreign exchange reserves.
As per the official, the fall in the rupee was due to the tightening of interest rate by the Federal Reserve, causing the flow of dollars to the US from other countries. USD/INR spot closed 5 paise higher at 79.98 on Wednesday.
“Demand for USD from oil marketing companies and weakness in Yuan added to the demand for USD/INR. Over the near term, we expect USD/INR to trade with an upward bias, driven by fragile global risk sentiments. We could see a range of 79.60 and 80.40 on spot,” said Anindya Banerjee, vice-president, of currency derivatives & interest rate derivatives at Kotak Securities.
The Indian currency fell due to Fed rate hike: Official
According to a top government official, the fall in the rupee was due to the tightening of interest rate by the Federal Reserve, causing the flow of dollars to the US from other countries.