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.