Reserve Bank Deputy Governor KC Chakrabarty today attributed the depreciation of rupee to high inflation, fiscal deficit and current account deficit.
"If the country has high fiscal deficit and high inflation, and also has high current account deficit, I don't see why the currency will not depreciate," Chakrabarty told reporters on the sidelines of an event hosted by the Central Bank of India and the SME Chamber here.
The rupee has been the worst performer in the Asian region having lost over 18% this calender year. The fall had been steep in the past few weeks and the local currency had plummeted to all-time low of 54.30 to dollar last Thursday.
Today, it closed at 53.05 to a greenback.
To arrest the rupee fall, the central bank had taken steps such as imposing restrictions on forward trading in the local currency by FIIs and traders and capping banks' exposure to the forex market. It has also deregulated interest rates on NRE and NRO accounts.
The RBI is also believed to have intervened in the forex market by asking state-run banks to release more dollars to stem rupee depreciation.
