CII seeks RBI's intervention in currency markets
The Reserve Bank of India should intervene in the currency market to stabilise the appreciating rupee that is threatening to derail the nascent recovery in exports, the CII said on Wednesday.business Updated: Apr 14, 2010 14:48 IST
The Reserve Bank of India should intervene in the currency market to stabilise the appreciating rupee that is threatening to derail the nascent recovery in exports, the CII said on Wednesday.
"Reserve Bank of India should intervene in the currency markets to stem any further appreciation in the rupee (against other currencies especially the dollar)," the chamber said in a representation to the RBI.
The central bank is scheduled to announce its monetary policy on April 20.
The rupee has appreciated about 12 per cent in the last one year against the dollar, as the foreign institutional investors (FIIs) pumped in huge inflows.
The domestic currency has also strengthened against other currencies, including the Euro and the Japanese Yen.
"This has hurt the competitiveness of Indian exports and further appreciation should be prevented," it said.
Dollar depreciation results in lower margins for exporters, as they realise less value for the foreign exchange in terms of the local currency.
The domestic currency closed at 44.46 a dollar, at Rs 60.46 per euro and Rs 47.82 per 100 yen yesterday.
CII said the currency movements are being driven essentially by capital flows which tend to be volatile.
"If the RBI tightens monetary policy, there is a risk of a further surge in these flows, which will be attracted to higher yields," Banerjee said.
Betting high on India's economic prospects, so far this year, FIIs have put in over USD 5 billion in equities.
The call for RBI intervention has been growing with the appreciation in the rupee.
Apex body of exporters FIEO has also demanded a fixed rate of rupee against the dollar.
India's exports after contracting for 13-months since October 2008 have started picking up from November 2009.