New Delhi, June 20 (ANI): The government on Thursday said that it is not short of options when it comes to tackling the falling rupee and will take action as deemed necessary.
This was revealed by Chief Economic Adviser to the Finance Minister Raghuram Ranjan after the rupee fell to a record low.
Rajan also said the Reserve Bank of India (RBI) would take action to support the rupee as appropriate.
"The finance ministry, the RBI (Reserve Bank of India) and SEBI (Securities Exchange Board of India) are watching developments closely and would take action, as appropriate. We are not, let me emphasise, we are not short of actions and instruments, if and when the need arises," said Rajan.
The rupee fell a day after U.S. Federal Reserve Chairman Ben Bernanke confirmed the Fed would begin winding down its stimulus spending later this year, and data showed China's factory activity weakened to a nine-month low in June.
The rupee, the worst Asian performer on Thursday in a global market sell-off, was instead supported by the Reserve Bank of India, which stepped in to sell dollars after it slumped to a record low of 59.9350 against the dollar, traders said.
The mixed government messages and a cautious RBI are exacerbating the perceived vulnerability of a country suffering from a record-high current account deficit in the midst of a global downturn sparked by potential tapering in U.S. monetary stimulus and a weakening Chinese economy.
"We should not be overly pessimistic, we sort of swing from waves of optimism to pessimism. There is nothing particularly wrong with the rupee right now. Yes, it has depreciated but that is true of every emerging market currency at this point. And I believe that over time matters will stabilize," said Rajan.
The rupee has been among the top decliners in emerging currencies since May due to a current account deficit that hit a record 6.7 percent of gross domestic product in the October-December quarter. It was last trading at 59.82/81 from its 58.71/72 close on Wednesday.
The falling rupee and a narrowing differential with U.S. Treasury yields have hit bonds hard, spurring foreign investors to sell a net $4.7 billion over the 19 sessions through Tuesday.
Government bonds slumped again on Thursday. The benchmark 7.16 percent 2023 bond yield rose 10 basis points to 7.36 percent from its previous close, which led to the fixed income association scrapping trading bands.
Government officials have blamed global volatility for the rupee's tumble and vowed action without offering specifics.
The RBI kept interest rates on hold this week after cutting them in each of its previous three policy reviews, warning of upward risks to inflation due in part to a weaker rupee.
Finance Minister P.Chidambaram last week promised government measures including raising foreign direct investment limits and revising locally produced gas prices and power tariffs, though investors remain sceptical about implementation. (ANI)