Amid concerns over declining rupee, Finance Minister P Chidambaram on Monday said the currency will find its level as steps being taken by the government to contain fiscal and current account deficits will improve investor sentiments.
"We are committed to contain the fiscal deficit within the target and we are addressing how to finance the current account deficit. Sentiment will turn in favour of the rupee.
I think rupee will find its level," he said in an interview with PTI. The rupee had touched historic low of 60.76 level against the dollar on June 26 due to heavy capital outflows amid fears of early withdrawal of US monetary stimulus.
Both the government and RBI have taken steps to contain gold imports, which is putting pressure on the CAD. Measures have been taken to enhance FII inflows in addition to easing norms for domestic companies to raise fund from abroad.
The Finance Minister, however added there is 'no good and bad value' that one could attach to the price of the rupee.
"It's a price. Rupee is bought and sold. Dollars are bought and sold there is a price. It's also a function of supply and demand. It's also influenced by sentiment," he said.
Unfortunately, Chidambaram said, it is not only the sentiment of Indian buyers and sellers that matters in the forex market.
"Even the sentiment of a lone gentleman (US Federal Reserve chairman Ben Bernanke) in the US impacts the rupee. And I have said Mr Bernanke statement is misunderstood or misinterpreted," he said.
Chidambaram said even in the US there are different views on the appropriateness of the Fed statement, it's timing and its content. "But I think once the true import of that statement sunk in... the rupee has recovered in the last few days. Even today rupee has recovered a bit," he added.
The rupee today rose by 10 paise to 59.29 against the dollar in early trade at the Interbank Foreign Exchange market on increased selling of the US currency by exporters. Chidambaram also pointed out that high CAD, fiscal deficit and inflation have a depreciating impact on the rupee.
The Finance Minister said that all emerging economies -- including Mexico, Chile, South Africa and Turkey – are running huge current account deficits.
India's CAD touched a record high of 4.8 per cent of the GDP in the 2012-13 financial year due to high imports, including that of gold. High CAD puts pressure on the value of the rupee.