Rupee volatility will be contained: Arvind Mayaram

Department of Economic Affairs (DEA) Secretary Dr. Arvind Mayaram on Friday said there would be a stable environment for the rupee and its volatility will be contained.

"There will be a stable environment for the Rupee, volatility will be contained. No curbs on dollar outflow, we want to create a level playing field where economic growth is sustainable," he said.

"We are not short of money, or reserves or foreign exchange," he added.

Earlier sources in the Finance Ministry had said that the key factor behind the volatility in the Indian rupee is due financial developments taking place in the United States and in other parts of the world.

Asked what is responsible for the Indian rupee dropping to a historic low of 62 to the dollar today, they said: "It is a result of something happening in the United States and worldwide."

"The employment data in the U.S. shows betterment, and consumer prices were two per cent higher in July. This indicates that there is a chance of a recovery in the U.S. That's why the market has reacted, and there is a softening of the rupee," they added.

"We are not aiming for any level of the rupee. We don't want to fix any cut off rate for the rupee. Volatility in rupee is the main concern. The American economic scenario is improving, more jobs are being created, therefore, higher dollar inflows to the U.S., impacting currencies in other countries," the finance ministry sources said.

Earlier, the rupee dropped to a historic low of 62.00 per dollar in late morning trade on Friday.

The rupee surpassed the previous all-time low of 61.80 hit just last week and traded nearly 1 per cent lower from Wednesday's close of 61.43.

The partially convertible rupee was trading at 61.87/89 per dollar at 10.26 a.m., after hitting a record low of 62.03.

According to reports, Indian policymakers have cobbled together a slew of steps over the past month in a bid to halt the rupee's slide, including the central bank's extraordinary steps on July 15 to drain cash from the system and raise short-term interest rates in an economy already growing at a decade low.

Yet none of the steps unveiled so far have convinced investors that India can attract overseas investments, which is seen as essential in narrowing a record high current account deficit that is the biggest source of the rupee weakness.

The approach is beginning to test the patience of foreign investors, just when emerging markets such as India are already seen as particularly vulnerable ahead of the expected tapering of monetary stimulus by the US Federal Reserve.