India to tackle rupee volatility against dollar, says government official

The rupiah has slipped 6% against the dollar this year, weighed down by the general strength of the dollar and as investors retreated from domestic stock markets

The rupiah has slipped 6% against the dollar this year, weighed down by the general strength of the dollar and as investors retreated from domestic stock markets

India is trying to “adjust the volatility” of the Indian rupee which has fallen to record lows against the dollar in recent weeks, a government official said on Monday, amid fears of a widening trade deficit and the sale of assets by foreign investors.

The rupee has plunged 6% against the dollar this year, weighed down by the general strength of the greenback and the withdrawal of investors from domestic stock markets.

Meanwhile, India’s trade deficit hit a monthly record of $24.3 billion in May, hurt by rising commodity prices.

“When oil prices are this high, it is obvious that the CAD (current account deficit) will increase. In recent years, India has filled the CAD with capital flows. This year there are headwinds on capital flows,” the official, who did not want to be named, told reporters.

As of 10:13 GMT, the partially convertible rupee was trading at 78.95/96 to the dollar, close to the new high it hit on Friday.

The official, however, said India’s macroeconomic fundamentals remained strong and he was “fairly confident” that India would come out “well” when the situation improves.

The official also said the government would stick to the budget deficit target of 6.4% of GDP for the 2022-23 fiscal year which started on April 1.

Comments are closed.