NEW DELHI, Sept 15 India’s government sent mixed messages on Thursday whether it wanted a weaker rupee, with Commerce Minister Nirmala Sitharaman saying she had not told a reporter the government was discussing a devaluation but stopping short of an outright denial.
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The rupee hit the 67.07 mark, down 0.25% after CNBC-TV18 reported that the finance and commerce ministries were likely to consider a devaluation in the currency later this month.
It washed out initial gains and dropped to 67.0750 per dollar on fresh dollar demand before quoting at 66.96 per dollar at 1100 hrs. At 0540 GMT (01:40 a.m. EDT), it was trading at 66.9550, lower than Wednesday s close of 66.8875/8975.
Forex dealers said that besides selling of the American currency by exporters and banks, weakness in the dollar against some currencies overseas supported the rupee.
By 11 am, the currency recovered some ground after a top finance ministry official played down the news. “There is no proposal to devalue”, a top Finance Ministry official said.
“The value of rupee is determined by the market and there is no plan to change policy”, Das said.
The finance ministry, which has a far more central role in economic policy, denied that any discussion on a devaluation had taken place.
“They (commerce ministry) have in the past advocated a freer fall of the rupee”.
“Exporters would have come to the Commerce Ministry with this issue”.
The Federation of Indian Export Organisations (FIEO) had discussed the issue of the rupee’s exchange rate and interest rates with the commerce ministry.
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Three of the MPC s members would be “external” candidates. The RBI does not want to “give a blanket guarantee that there will be no volatility” due to the redemptions, but will do “what is necessary” to counter swings, it said last month. A replacement for Patel as deputy governor has still to be chosen, and it is conceivable that he could find himself heading a panel with dovish leanings.
