Montek on rupee: RBI has a lot of firepower and they will intervene

Planning Commission Deputy Chairman Montek Singh Ahluwalia, reacting on the steep rupee fall, today said, "RBI (Reserve Bank of India) has a lot of firepower and they will intervene".

The Reserve Bank likely sold dollars via state-run banks after the rupee slid to a record low, Reuters said quoting several dealers.

The intervention was spotted when the rupee hit 59.90 to the dollar or below, traders told Reuters.

The rupee slumped to a record low on Thursday, while stocks and bonds were hit, after the Federal Reserve signalled a tapering of its monetary stimulus, highlighting the country's dependence on foreign capital inflows to fund its current account deficit.

The rupee fell to a record low of 59.94 to the dollar, breaching past its all-time low of 58.98 on June 11.

Dr Ahluwalia said the further decline in the rupee was caused by Fed's statement and on global economic uncertainty.

It is not just the Indian currency but currencies of other emerging economies like Brazil, South Africa and Mexico too have depreciated, Dr Ahluwalia said.

However, he admitted that the rupee has depreciated more than some Asian currencies.

Dr Ahluwalia assured investors that the Indian economy is stable despite the rupee volatility.

"When Fitch upgraded India, people thought rupee was improving," he said.

Ratings agency Fitch recently upgraded India's sovereign ratings outlook to "stable" from "negative" a year after its initial downgrade, citing government measures to contain the budget deficit and the progress made in improving investment and economic growth.

(With inputs from Reuters)