No rationale for such dip in rupee, says Subhash Chandra Garg

New Delhi: Union economic affairs secretary Subhash Chandra Garg said on Wednesday that the government and RBI will do everything to ensure that the rupee does not slide to unreasonable levels

“No fundamental rationale for rupee to depreciate to levels we saw till yesterday,” said Mr Garg. The secretary said that it reflected overreaction of the market operators.

“The government and RBI will do everything to ensure that rupee does not slide to unreasonable levels. Today’s correction seems to reflect that realisation,” he said.

The rupee on Wednesday rebounded from the historic low of 72.92 to end higher by 51 paise at 72.19 against the dollar. It had crashed to an all-time low of 72.92 in the morning trade tracking higher crude oil prices that increased concerns of widening trade deficit.

The RBI intervened heavily in the foreign exchange market after the rupee took another plunge and threatened to breach the 73-mark, currency dealers said. The rupee has weakened more than 11 per cent since the beginning of 2018 to become Asia’s worst performing currency this year.

The fall has resulted in increase in the prices of petrol and diesel prices in the country. This has also put pressure on the government to reduce excise duty on fuel to soften the blow on the common man. However, till now the finance ministry has resisted pressure to cut taxes on fuel.  

Meanwhile, the benchmark bond yield ended at 8.13 per cent, down 5 basis points on the day and retreating from the day’s high of 8.23 per cent, its highest since November 14, 2014.

Moody’s had warned on Monday that a sustained weakening of the rupee would be credit negative for India Inc, particularly those that generate revenue in rupees but rely on dollar debt to fund operations and have significant dollar-based costs, including capital expenses.