Jalan again tries to talk up rupee

Jalan again tries to talk up rupee
ENS ECONOMIC BUREAU

MUMBAI, AUG 4: The Reserve Bank of India (RBI) on Friday maintained that it was not in favour of allowing the rupee to find its own level against the dollar. ``The RBI will not allow the rupee to fall freely,'' RBI governor Bimal Jalan said here on Friday. Jalan's comments came one day after the RBI issued a strong statement on Thursday explaining its stand on the rupee fall.

However, the rupee continued its slippery trend against the US dollar for the fifth straight day by registering a further fell of 8 paise to close at a new record low of 45.42/43 today, notwithstanding the Reserve Bank of India (RBI)'s repeated assurance of measures if necessary in the future.

Addressing a press conference here today, Jalan said that ``there is no place for the currency in finding its own level in the emerging markets like India where the market is severely affected by adverse expectations due to lack of depth.'' ``In any developed or developing economy,'' he said, the monetary authorities keep on changing their focus, depending on the demand and supply situation in the market. The RBI's measures on July 21 -- hike in bank rate and CRR -- reflected its assessment of developments in the domestic and international markets in regard to liquidity as well as movements in international interest rates abroad which had hardened considerably over the past year while Indian interest rates came down substantially.

``These measures were spaced out deliberately, and the RBI had been assessing the situation on day-to-day basis,'' he said. However, the governor expressed little discomfort at the way the Indian rupee was losing its ground on back of the growing demands for the US dollars by the foreign funds and banks.

``We keep monitoring the situation on the exchange rate front everyday and we are comfortable with the current position,'' Jalan said. He felt that the recent demand for dollars among others could be from importers, hedging, forward cover and bunching of payments and added that the apex bank was meeting the demand-supply mismatch by dipping into the forex reserves.

Jalan, however, declined to put a ball-park figure on the amount of dollars the RBI had sold in order to stabilise the rupee. Asked for his views about convertibilty of the rupee, Jalan said ``not being convertible is a help as volatility was much less.''

He emphasised that the July 21 measures were not a knee-jerk reaction and added that the RBI could have taken stiffer measures, but the conjunction of circumstances called for only the steps which had been already put in place.The depreciation of the rupee would not have an impact either on inflation or industrial growth, Jalan explained and added that it would not directly have a bearing on the fiscal deficit.

With today's fall, the rupee has so far lost 55 paise against the American greenback during the week which happens to be the highest ever fall by the Indian currency in the last few years, dealers said. ``The market was waiting for some more measures, but only some statements nothing came from the RBI, which basically resulted into a further fall in the rupee value today,'' a forex dealer with a privately owned forex firm said.

The rupee opened a bit higher at 45.28/31, remained under pressure of all round dollar demand and finally ended at 45.42/43 per dollar, shedding 8 paise of its value from the previous close of 45.34/35. Dealers termed the demand for the dollars was genuine and ruled out speculation.