Steps to curb rupee speculation may not be temporary

CRR lowered by 50 bps, key rates unchanged

Reserve Bank of India Governor Duvvuri Subbarao said financial markets should not be under the impression that recent administrative steps that authorities have taken to curb speculation in foreign exchange are temporary.

The RBI has been intervening in the foreign exchange market to support the rupee, which slumped to a record low of 54.30 to the dollar in mid December.

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The central bank and the government have also taken other steps to support the currency, including liberalising interest rates for bank deposits held by non-resident Indians as a way to encourage dollar inflows.

The rupee, which has been hit by slowing economic growth, worsening government finances and a widening trade deficit, was trading at 50.06/07 at 1025 GMT on Tuesday.

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Subbarao said it would be useful if the government provided a medium term path for reducing the fiscal deficit.

There is no great concern about external debt being higher than India's foreign exchange reserves, he added.

The RBI cut the cash reserve ratio for banks by 50 basis points on Tuesday to ease tight liquidity conditions, signaling a policy shift towards reviving growth after nearly two years of fighting inflation.

Steps to curb rupee speculation may not be temporary - RBI