Mumbai, Aug. 12: The rupee lost ground today as the forex markets did not have the details of the government’s plan to put a lid on the current account deficit (CAD), which were unveiled at a press conference held after trading hours.
The market was agog in the morning after finance minister P. Chidambaram said the government intended to cobble measures to improve fund flows into the country and tackle CAD, which soared to 4.8 per cent of GDP last year.
The rupee fell 39 paise to end at 61.27 against the US greenback, close to a record low as demand for dollars from importers remained strong. However, this came after a rally in its value to a day’s high of 60.45 as the markets eagerly waited for the new measures that the finance minister had promised. The rupee had opened higher at 60.48.
However, there was some disappointment during market hours as Chidambaram revealed in Parliament that the government intended to cap CAD at $70 billion this fiscal, or 3.7 per cent of GDP. The government is also planning to bring down imports of gold, silver and non-essential goods.
Other measures to check the rupee’s slide and contain the current account deficit are also on the anvil, he said. Though he announced measures to crank up inflows, forex circles said the lack of details saw the rupee losing ground to the dollar.
Later, the currency fell to a low of 61.30 before settling at 61.27, a drop of 39 paise or 0.64 per cent. On August 7, the rupee had ended at record low of 61.30.
Treasury market circles said there were expectations that both the Centre and the RBI might announce another round of measures, which could keep the dollar’s rise under check.
A positive for the local unit during the day’s trade was that the benchmark Sensex climbed 157.64 points, or 0.84 per cent, buoyed by the encouraging trade data for July. Exports grew 11.64 per cent to $ 25.83 billion in July, snapping two consecutive months of decline. Imports fell 6.2 per cent to $ 38.1 billion, leaving a trade deficit of $12.2 billion.
However, analysts feel that with demand for dollars continuing to remain strong, much would depend on the measures that will be announced by the government. “Even if they are announced, it may lead to an immediate rally in the rupee. However, the underlying sentiment continues to remain bearish,” an analyst added.