$ 500 m Bond issue will strengthen rupee - CB Governor

The rupee depreciated 4.9% during this year against the dollar and the main reason for the depreciation is the floating exchange rate regime which came into force in the country since 2001, said the Governor of the Central Bank Ajith Nivard Cabraal.

He said the US$ 500 mln Bond issue of the government might stop the depreciation as the country will have an inflow of foreign exchange and it might some times even lead to an appreciation of the rupee. Market expectations also play a major role, said the Governor.

The Governor also said that in India, the Indian rupee's appreciation has lead exporters to a crisis and they are requesting the government to depreciate its currency.

In 2006 the dollar depreciated 13% compared to the Euro while it depreciated 11% against the sterling pound. Those in the United States are mature and they didn't make an issue or think that the economy was crashing.

Cabraal said the rupee depreciated 5.2% last year and the main reasons were that the government had to settle the loans which we did not settle in 2005 due to the tsunami and the high oil prices. In 2004 the rupee depreciated 5.9% while the country saw a complete reversal in 2005 due to the inflow of tsunami funds.