SE Asia volatility also taints India

SE Asia volatility also taints India

NEW DELHI (Reuter): Finance Minister P. Chidambaram said yesterday the Reserve Bank of India (RBI) will not tolerate excessive volatility in the rupee's exchange rate and added that some of the turbulence in Southeast Asia's currency markets has spilled over to India.

Chidambaram told an annual meeting of economic editors that the Southeast Asian exchange markets had been extremely volatile.

"It is naive to think that some of that volatility has not spilled over. It has spilled over to the Indian market."

"While the exchange rate is market-determined, the RBI will not repeat not allow volatility and excessive speculation...what we want are orderly conditions in the foreign exchange market...we want orderly conditions in the market and let the market determine the exchange rate," Chidambaram told the editors.

Chidambaram also added: "No decision has been taken on a (rupee/dollar) band.

That should put an end to that controversy.

He was referring to a newspaper interview with Prime Minister Inder Kumar Gujral last month in which Gujral was quoted as saying the finance ministry and the RBI were working on a rupee/dollar trading band.

Both the ministry and the central bank have denied a band is in the offing, but the rupee has been hit by major turbulence over the past few weeks. On Monday it ended at a 19-month low of 36.685/95 to the dollar, recovered on Tuesday, and on Wednesday was trading at around 36.470/500 at 0535 GMT after RBI governor C. Rangarajan expressed confidence in India's economic fundamentals.