RBI has no tolerance for volatile rupee, says Governor Shaktikanta Das
The Indian currency has been touching new record lows against the United States dollar in the last few sessions.
The Reserve Bank of India will continue to engage with the foreign exchange market to ensure that the rupee finds its level, said governor Shaktikanta Das on Friday.
“I would like to reiterate that we have no particular level of the rupee in mind,” Das said during the annual conference of Bank of Baroda in Mumbai. “But we would like to ensure its orderly evolution and we have zero tolerance for volatile and bumpy movements.”
The governor’s remarks came at a time when the rupee has been touching new record lows against the United States dollar in the last few sessions. The value of the rupee has depreciated around 8% since January, according to Mint.
On July 19, the rupee closed at 79.92 against the dollar after touching an all-time low of 80.05 during intraday trade.
Forex traders said that a significant demand for dollars from oil importers, firm crude oil prices, and concerns about swelling trade deficit have been influencing investors’ sentiment. They predict the rupee will be seen in the range of 79.75 to 80.25 in the coming days.
On Friday, Das claimed that the movement of the rupee has been orderly due to the actions taken by the central bank, including measures to encourage inflows.
He said that it was important to recognise that global factors, including the war between Russia and Ukraine, the rise in commodity prices and the coronavirus pandemic have had an overwhelming impact on economies around the world.
“Even reserve currencies such as the Japanese yen, the Euro and the British pound sterling have not been spared,” Das said. “Portfolio funds are selling off assets and fleeing to safe haven.”
He, however, claimed that the impact of these “overwhelming spillovers” on India has been relatively modest.
“In fact, the Indian rupee is holding up well relative to both Advanced and EME [Emerging Market Economies] peers, Das said. “This is because our underlying fundamentals are strong, resilient and intact. The recovery is gradually strengthening.”
On Monday, Union Finance Minister Nirmala Sitharaman told the Parliament that the value of the rupee has depreciated by around 25% against the dollar since December 2014.