The rupee weakened by over 50 paisa or 0.8% against the dollar as speculation is rife over government considering a fiscal stimulus to boost economic growth which could widen the fiscal deficit.
The rupee ended the day on a four month low, at 64.80 a dollar, as compared to Wednesday’s close of 64.27. The yield on the 10 year benchmark government bonds went up 10 basis points to 6.68%, its highest close since May 24.
“From day one, this is a proactive government. We are analyzing the economic indicators and appropriate action will be taken at right time,” the finance ministry tweeted finance minister’s Arun Jaitley’s comment at an investor’s summit in New Delhi, which fueled the speculation.
Currency dealers said if the government is considering a stimulus package - some media reports identified the quantum at Rs 50,000 crore - then the government is likely to miss the fiscal deficit target, which is 3.2% of GDP for 2017-18. The fiscal deficit already reached 92% of the budget estimate in the first four months of the financial year.
“There was some speculation that government is considering stimulus package, for which the fiscal deficit could miss its target,” said Anindya Banerjee, currency analyst at Kotak Securities. “Rupee weakened against all major global currencies today,” he added. (End)