Mahatma Gandhi depicted on a Rs 100 note. (Photographer: Scott Eells/Bloomberg News)

Rupee Pares Decline as India Official Denies Devaluation Report

(Bloomberg) -- India’s rupee pared losses from a two-week low after a Finance Ministry official denied a report saying the government may discuss a plan to devalue the currency.

Asia’s third-largest economy has no plan to change its policy on the rupee and the currency’s value is determined by the market, Economic Affairs Secretary Shaktikanta Das said. The rupee had weakened earlier after the CNBC television channel reported that the nation’s trade and finance ministries may discuss a rupee-devaluation proposal next week, citing a government official it didn’t identify.

The rupee fell 0.2 percent to close at 67.0250 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It fell to 67.0750, the weakest level since Aug. 1, following the CNBC report, after rising as high as 66.82 earlier in the session.

Rupee Pares Decline as India Official Denies Devaluation Report

“This is ostensibly part of the struggle for influence over monetary policy as former Reserve Bank of India Governor Raghuram Rajan steps out of the way,” said Nizam Idris, head of fixed-income and currencies at Macquarie Bank Ltd. in Singapore. “We think for now, the RBI holds sway insofar as the currency policy is concerned. Bowing to such pressure will significantly dent the RBI’s inflation targeting credentials which Rajan and current RBI Governor Urjit Patel have worked so hard to establish.”

India’s exports have fallen in all but one of the past 20 months. Even so, the nation’s current account probably swung to a $2.65 billion surplus in the April-June quarter, its first since 2007, according to the median of economist estimates in a Bloomberg survey before data due this month.

The RBI was said to have called traders to inquire about the sudden drop in the currency, said Navin Raghuvanshi, a Mumbai-based trader at DCB Bank Ltd.

Indian sovereign bonds fell, with the yield on the newly-issued 10-year notes rising one basis point to 6.88 percent, according to the central bank’s trading system.