Can allow rupee to depreciate, see no inflation constraints, says Sanjeev Sanyal

Indian rupee today strengthened by another 34 paise to close at a one-week high of 71.84 against the US dollar on positive macro data along with broadly positive global cues. The domestic currency also got a shot in the arm after the government said that all steps will be taken to ensure the domestic currency does not depreciate to "unreasonable levels".
 
The hopes of policy intervention by the government to defend the volatile currency is one of the factors considered to have contributed to today's positive momentum. 
 
Sanjeev Sanyal, who is the Principal Economic Adviser in the Ministry of Finance, sounded very positive in his reaction to ET Now, saying "We have reserves worth $400 bn, are in a position to allow rupee to depreciate. Oil prices, emerging market situation responsible for the depreciation. Inflation is well behaved, don't want to interfere with it."
 
On the factors affecting the rupee's value against dollar as well as reacting to all the talk of expectations of a RBI key rate hike in the upcoming meet, he said, "Don't need rate hike to control Rupee fall; no such thing as fair value of rupee. Competitors have allowed their currency to depreciate amid Trade War."
 
On another news channel CNBC-TV18, he reiterated his views and said, "it's unnecessary to hike interest rates at present to control Rupee fall. Can allow Rupee to depreciate, see no inflation constraints."
 
Indian currency, however, also benefitted from the massive US Dollar re-pricing in the aftermath of the weak US inflation report, discounting the chances of Fed hiking rates four times this year, said a PTI report.

On the other hand, CNBC-TV18 also quoted Upasna Bhardwaj, Senior Economist, KotakBank as saying, "Expect 25 bps rate hike in October, but see no reason for an immediate or aggressive rate hike." 

She explained, "Must remember that the rupee is down around 12-13% since February after a significant period of stability."
 
The rupee sentiment was strengthened with a combination of positive macro-related developments after the country's industrial production grew at 6.6 per cent in July and retail inflation cooled to a 10-month low of 3.69 per cent in August.
 
Earlier today, official data showed WPI-based inflation eased to a four-month low of 4.53 per cent in August.

The rupee had rebounded from an all-time low of 72.92 to end up a strong 51 paise to end at 72.18 to the dollar in the previous session Wednesday. 

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The domestic currency has been sliding against the US dollar since August, depreciating over 6 per cent since then as oil prices rebounded and trade tensions revved up.