 "Media report on Rajan's re-appointment hits forex markets")
The rupee fell to a one week low at 67.45 per dollar, down 0.3% from its close on Wednesday, after the Anandbazar Patrika reported that the Reserve Bank of India (RBI) Chairman, Raghuram Rajan, would prefer to go back to the United States on completion of his term in early September, citing sources close to him. The RBI did not immediately reply to requests for comment.
Foreign investors have been on edge whether Rajan — a former chief economist at the International Monetary Fund — will be re-appointed by the government for a two-year second term.
Reuters on Wednesday reported the government would re-appoint the governor, if he wish to stay on, citing government officials. Rajan has previously declined to say whether he would accept such a re-appointment saying it would be speculative to discuss.
Still, most analysts expect Rajan will remain at the helm of the RBI for another two years, and despite widespread speculation, markets have not been significantly hit by fears he would leave in September.
"Some rumours that the governor may not go for a second term led to reducing of short positions," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank in Mumbai. "Otherwise the rupee was expected to be strong today on the good GDP numbers," Raina said.
India on Wednesday said gross domestic product expanded at a stronger than expected rate of 7.9%, extending its lead as the world's fastest growing large economy.
Rajan has been popular with foreign investors who cheered him for his efforts to lower India's inflation and clean up state-run banks' massive bad loans.
But he has also attracted the opposition of some local politicians for not lowering interest rates enough, raising some concerns about his future.