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India FM eases worries over rupee
November 11, 2013, 10:15 am

Forex reserves had risen by $1.51 billion to touch $279.24 billion for the week ended October 11 [AP]

The Indian currency started weakening last week after the dollar purchase by oil companies was partly shifted to the market [AP]

Indian Finance Minister Palaniappan Chidambaram on Monday assured the nation that the domestic currency will stabilise amid worries over a recent weakening of the rupee.

The “rupee will settle down,” the finance minister told reporters in the Indian capital.

In early trade on Monday, the rupee fell to 63.33 to a dollar, its weakest level since September 18.

The Indian currency started weakening last week after the dollar purchase by oil companies was partly shifted to the market.

“Rupee weakness is due to OMC forex demand being moved to market. 30-40 per cent of OMC demand has moved to market,” India’s Economic Affairs Secretary Arvind Mayaram had said last week.

Public sector oil companies are the biggest buyers of dollars, requiring $8-8.5 billion every month for the import of an average 7.5 million tonnes of crude oil.

The rupee has recovered over eight per cent since August 28, when it fell to a record low of 68.85 to the dollar.

The gain in the currency had followed optimism that the United States Federal Reserve would delay the tapering of its bond buying programme.

However, the Indian finance minister said last week that the country is prepared for tapering.

“We now know it [tapering] will happen…it will happen perhaps in January or February, today they say it will happen in March…Market and government are now prepared for this, in the sense we know it will happen.”

“Therefore, we need to strengthen the fundamentals of the economy, what the [RBI] Governor said bullet proof balance sheet, which means we will contain CAD, we will contain fiscal deficit, improve the revenues, contain expenditure, take steps to prevent excessive speculations on the currency,” he said.

Chidambaram also said that India’s current account deficit (CAD) will be contained below $60 billion this financial year after an earlier estimate put the figure at $70 billion.

“We think we can peg it [CAD] at $60 billion or below. I am confident that we can do even slightly better than $60 billion,” he told a news channel last week.

Source: Agencies