The Central Bank and Treasury have both said the rupee was expected to stabilise around Rs.125 to a dollar. According to Central Bank data, the dollar closed at Rs. 131.60 last week, down from Rs. 131.91 the previous week. A year ago, the dollar was trading at Rs. 110.09.
In February this year the Central Bank adopted a more flexible exchange rate regime in response to a looming balance of payments crisis. Treasury Secretary Dr. P. B. Jayasundera later said there was no fundamental basis for the exchange rate to hover above Rs. 130 to a dollar and that the authorities would take action against currency manipulators. The Central Bank last week issued a new directive governing foreign exchange dealing at the country s banks.