Rupee falling due to global factors, no need to panic: FM
As the rupee hit its record low level of Rs 54.46 against dollar, the finance ministry today said there was no need to panic and the slide would be contained when there is certainty in eurozone recovery.business Updated: May 16, 2012 16:31 IST
As the rupee hit its record low level of Rs 54.46 against dollar, the finance ministry on Wednesday said there was no need to panic and the slide would be contained when there is certainty in eurozone recovery.
"Rupee is falling due to global factors. This is no need to panic. The fall might continue till there is a certainty about the eurozone recovery. RBI is keeping a watch on it," a finance ministry official said.
The rupee on Wednesday fell to a low of 54.36 against the dollar, breaching its previous record low of 54.30 in December 15. It had closed at Rs 53.79 against a dollar on Tuesday.
Global risk aversion is putting pressure on the domestic currency as foreign funds are pulling out money. Besides, a widening current account deficit and concerns of investment in India is also putting pressure on the rupee. The Indian rupee has lost about 10 per cent since it touched its peak in February.
To check the sliding rupee, the Reserve Bank had last week asked exporters to convert half of their foreign exchange reserves into rupee to make available dollars in the market.
Earlier this week, Prime Minister's Economic Advisory Council Chairman C Rangarajan had said the depreciation in the value of rupee was mainly due to a high current account deficit (CAD) which arises when import of goods and services exceeds its export. The CAD had touched 4% of GDP at the end of December 2011.
Rangarajan had pitched for utilisation of foreign exchange reserves to arrest the slide of rupee caused by temporary fluctuation in capital flows. The country's foreign exchange reserves stood at around $290 billion.
Earlier on Wednesday, the BSE benchmark Sensex dipped below the psychological 16,000 level, the first time since January, on heavy selling by foreign funds.