Amid global tumult, Rupee breaches 87 against dollar

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The Indian Rupee slumped almost 0.6% or 49 paise to breach the 87 mark against the U.S. Dollar on Monday, amid a meltdown for most emerging market currencies and stock markets across Asia and Europe on the first day of trading after President Donald Trump imposed higher tariffs on Canada, Mexico and China. The Rupee, which had crossed the 86 mark vis-à-vis the dollar on January 10, closed at 87.11 after slipping close to 87.3 during the day.

A top Finance Ministry official signalled the government was unfazed by the currency’s trajectory, terming it a global uncertainty that has to be dealt with and stressing that India does not believe in using ‘exchange rate policy’ to push trade and the key is to manage volatility, not to attain a specified level for the currency.

“What is happening over the last couple of months is that the dollar is appreciating. The Dollar index is pretty high, and against all currencies… it is not just the emerging markets, but even with the developed countries. Today, the Dollar Index has picked up again and is above 109,” Economic Affairs Secretary Ajay Seth told The Hindu. The index had risen over 1% through the day, to 109.7.

“As per our policy that we know the Reserve Bank of India follows, is to take care of the volatility at any level of dollar. At any level, if the dollar is appreciating, that means our imports become a little costlier, but our exports become competitive,” he noted.

“However, India has never used exchange rate policies to promote exports. That is not our policy. That’s not a sustainable way to keep growing so we believe in strengthening our export competitiveness through better quality,” Mr. Seth emphasised, adding that India can only envisage ways to handle the uncertainty that any move by the U.S. to raise tariffs will trigger.

“Each country takes a decision which it assesses to be in their best interest as a sovereign entity, just as we decide what we feel is the best interest of India and Indian people. In sovereign decision-making, there is nothing wrong, because this is the assessment of that particular country. The only things in our hand is — how do we deal with that uncertainty?” the Secretary said.

“What happens in the rest of the world whether the global growth rate is X or Y — that is given to us, we have to deal with it that and in spite of that factor, we have to do what we have to do. If there’s this headwind, it means we must have a more powerful engine to move forward. That is what we try to do,” Mr. Seth explained.

The government’s focus, he said, is on making India more self-reliant by developing competitive advantages where it doesn’t have them. “This is a nuanced approach and we should be clear about it. Second, we should not create cost disadvantages through the tariff policy or through our regulations, and clean up those areas. So this Budget again tries to clean up those areas,” he pointed out.