The Indian Rupee fell on September 15 after a TV channel reported that Union Commerce Ministry will devaluate the unit to promote decreasing exports, but thinned the losses after a denial by the Union Finance Ministry.
The Rupee weakened 0.28 percent to more than Rs 67 to the US Dollar before shaving off losses after the Reserve Bank of India (RBI) stepped in to prevent a fall. At 05.40 GMT, it was trading at Rs 66.91, lower than September 14 close of Rs 66.81.
The Union Finance Ministry denied that the Centre was discussing a possible devaluation of the Rupee, whose floating exchange rate is managed by the RBI.
Economic affairs secretary, Union Finance Ministry Shaktikanta Das said there was no truth to reports of a Rupee devaluation. Stating that the Rupee’s value was determined by the market, Das said there was no plan to change policy on the Rupee’s valuation.
The Union Commerce Ministry is responsible for trade policy, but not for exchange rate policy, which doesn’t consult with the Union Finance Ministry for exchange rate policy.
In a tweet, Union Commerce Minister Nirmala Sitharaman did not deny whether the ministry was considering a devaluation proposal to the government.
Sitharaman, who does not hold cabinet rank, recently called on the central bank to cut interest rate by two percentage points. These remarks came at a sensitive time, as the RBI is under a new chief Urjit Patel, a six-member Monetary Policy Committee (MPC) was yet to be appointed.
A replacement for the deputy governor’s post, which has fallen vacant after Patel was appointed a governor, has yet to be chosen. Government officials say the MPC should be staffed up in time for Patel’s first policy meeting on October 4.
A drop in inflation last month to just over 5 percent has opened doors to a rate cut next month or in December, say economists.
The Rupee has been one of worst performers in Asia so far this year on subdued US Dollar inflows and persistent RBI intervention to bolster forex reserves.
Rupee’s sudden fall on Thursday has triggered the RBI to call forex dealers to check on their positions. Indian exporters have called aloud for lower interest rates and a weaker rupee to restore India’s global competitiveness. At present, the country’s growth rate is over 7 percent.
However, the RBI has been quite adamant it won’t follow such a policy, instead letting market forces decide the currency movement and only intervening to contain any sharp volatility.