The rupee's exchange rate is determined by capital flows and demand for the
dollar, Finance Minister Palaniappan Chidambaram said on Thursday when asked
about the rupee's slide to 13-month lows this week.
The rupee fell to 42.67 per dollar on Wednesday, its weakest since
mid-April 2007, weighed down by worries about record oil prices, a widening
trade deficit, signs of a growth slowdown, and concerns foreign investment
flows may weaken.
"The rupee will move both ways. It will appreciate and depreciate. That
depends on inflow and outflow and also demand
for the dollar," Chidambaram told reporters when asked about the rupee's
recent slide.
"Rupee will move always." He said there was no proposal before the ministry
to cut import duties on crude oil. "No. This will not help prices also,"
he said.
However, he said there was significant scope for cement prices to fall. On
Wednesday, Indian cement firms agreed to cut
prices in some states after meeting Trade Minister Kamal Nath. High
cement, metals and food prices have contributed to
annual inflation rising to 3-½ year highs of 7.6 percent in late April. In
response, the government and the central bank have announced a string of
measures to calm price pressures.
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