India to address volatility in rupee against dollar - government official

BY Reuters | ECONOMIC | 07/04/22 06:52 AM EDT

By Manoj Kumar

NEW DELHI, July 4 (Reuters) - India is trying to "address volatility" in the Indian rupee that has tumbled to record lows against the dollar in recent weeks, a government official said on Monday, amid concerns of a widening trade deficit and sell off of assets by foreign investors.

The rupee has plunged 6% against the dollar this year, weighed down by broad strength in the greenback and as investors retreated from the domestic share markets.

Meanwhile, India's trade gap touched a monthly record of $24.3 billion in May hurt by higher commodity prices.

"When oil prices are this high, obviously CAD (current account deficit) will go up. Last several years India has been bridging CAD with capital flows. This year there is headwinds on capital flows," the official who did not want to be named, told reporters.

As of 1013 GMT, the partially convertible rupee was trading at 78.95/96 per dollar, close to new record low it touched on Friday.

The official, however, said India's macro economic fundamentals remained strong and he was "fairly confident" that India would come out of "well" when the situation improved.

The official also said the government would stick to the fiscal deficit target of 6.4% of GDP for the 2022/23 financial year that started on April 1. (Reporting by Manoj Kumar; Editing by Toby Chopra and Alison Williams)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.