Planning Commission Deputy Chairman Montek Singh Ahluwalia Tuesday said the worst is over for the rupee and the fair value for the currency could be between 60 and 65 against the US dollar.
New Delhi: Planning Commission Deputy Chairman Montek Singh Ahluwalia Tuesday said the worst is over for the rupee and the fair value for the currency could be between 60 and 65 against the US dollar.
"I would certainly say so (worst is over for rupee). It is evident from the markets and from the guide posts that have been set to gauge competitiveness.
It is also important to realise that although the rupee is still depreciated compared to what it was a year ago, this depreciation is actually consistent with the objective of reducing the current account deficit," Ahluwalia told news channel.
When asked about the fair value of the rupee, he said the rupee could be anywhere between 60 and 65 to per dollar.
"...To offset the competitiveness change, the rupee could be anywhere between 60 and 65. We obviously would prefer the lower end of that range, in order to minimise the extent of the change that has occurred," he said.
He also said that people should be encouraged to hedge their exposure to the currency.
"I know that hedging has a cost, but on the whole, more and more corporates should be hedging their foreign exchange exposure, which would add to the systemic stability," he said.
Ahluwalia said after a period of exchange rate volatility, everybody starts hedging, but when the exchange rate stabilises, people reduce the extent of hedging.
"Therefore, let the market work out the correct level of the rupee."
He also said that there was a need for the exchange rate to be consistent with the objective of reducing the current account deficit from 4.8 percent of the GDP last fiscal to 3.7 percent (at USD 70 billion) in the current fiscal.
The rupee had hit an all-time low of 68.85 in late August due to huge capital outflows. However, the currency has stabilised since then on host of steps taken by the government and the Reserve Bank.
The rupee today ended unchanged at 61.79 against the dollar today on alternate bouts of demand and supply amid surprise steps by the RBI yesterday to increase liquidity conditions.