'Irrational Sentiment' Impacting Rupee Value: FinMin

Wednesday, 28 August 2013, 12:44 Hrs   |    1 Comments
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“This is an irrational sentiment. It will correct itself. It is important to stay on the course. There is no need to panic,” Economic Affairs Secretary Arvind Mayaram told reporters.

Historic low

He was responding to a query on the value of the rupee, which fell to a new low of 68.75 against the dollar in intra-day trade today.

The rupee has declined over 20 per cent since April on concerns about the country’s widening current account deficit, slowing economic growth and capital outflows.

The rupee dropped today as oil prices rose in Asian trade on concerns over possible US military action against Syria.

Current account deficit

Seeking to assure investors, Mayaram said that the current account deficit (CAD) in 2013-14 will be much lower than expected.

“CAD will be much lower than expected. We have already seen some moderation in CAD,” he said.

CAD, which is the difference between the inflow and outflow of foreign exchange, hit a record high of $88.2 billion in 2012-13. The Government expects to bring it down to $70 billion in the current fiscal.

Derivatives trading

Mayaram further said that the Government does not plan to ban derivatives trading in the currency market, a move that experts feel could help in curbing speculation.

Yesterday, Finance Minister P. Chidambaram had said that the rupee is undervalued and came out with a 10-point action plan to revive the economy, which included promoting exports, encouraging manufacturing, and reducing the fiscal deficit and CAD.

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