Financial sector measures can only help temporarily, says deputy governor K C Chakrabarty
Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty on Friday said the rupee’s depreciation was an outcome of real sector issues and financial sector measures could only help temporarily. He said the currency was weak due to fundamental factors and the global situation.
“If it is weak due to fundamental factors and the global situation, we will not be able to arrest it,” he said on the sidelines of an event here on Friday. He added the issue of trade deficits needed to be addressed. On asked whether the central bank would open a special dollar window for oil marketing companies (OMCs), he said such a measure would not be made public.
On Friday, the rupee gained for a second session in a row as exporters and companies sold dollars to take advantage of the current exchange rate. “Psychologically, this is a good level for exporters to get their dollars converted,” said Sandeep Gonsalves, forex consultant at Mecklai & Mecklai. The currency closed at 55.59 against the dollar, 0.9 per cent up against yesterday’s closing. Market participants said the central bank intervention at 56.15 per dollar also helped the rupee rally by about 50p in intra-day trade.
However, dollar buying by OMCs and foreign fund outflows limited the gains. According to the Bombay Stock Exchange, there were foreign fund outflows of Rs 220 crore from Indian equity markets, that were 1.7 per cent on Friday. Also, the rupee lost the day's gains towards the end of trade, as dealers squared off long positions ahead of the weekend.
“With no improvement in local and international issues, the local market and currency continue to feel the pinch. The US treasury yield has also made a record low of 1.56 per cent. The declining bond yield reflects the risk-aversion sentiment and extreme nervousness across global markets,” said India Forex Advisors in a note.
The euro continued to suffer on economic and political concerns as it fell further to 1.2336 from 1.2365 a day before. The dollar index against six major currencies was up at 83.32 against 83.04 yesterday.
With depreciation of 0.4 per cent, the rupee registered an eighth continuous weekly fall on Friday. In May, it lost 6.4 per cent against the dollar.
In a surprise move, country's largest bank SBI today increased interest rates on select fixed deposits by 0.25 per cent.