The Reserve Bank of India (RBI) does not have any fixed dollar-rupee exchange rate and its market interventions are to curb excessive volatility, said Governor Shaktikanta Das.
Chennai, Sep 30,2022: The Reserve Bank of India (RBI) does not have any fixed dollar-rupee exchange rate and its market interventions are to curb excessive volatility, said Governor Shaktikanta Das.
He also said the aspect of adequacy of forex reserves is always kept in mind while RBI intervenes in the forex market. The umbrella continues to be strong.
Announcing the Monetary Policy statement on Friday Das said during the current financial year (up to September 28), the US dollar has appreciated by 14.5 per cent against a basket of major currencies.
This has caused turmoil in currency markets globally.
The Indian rupee movement has been orderly as compared to the currencies of most other nations, Das said.
He said the Indian rupee has depreciated by 7.4 per cent against the US dollar during the same period – faring much better than several reserve currencies as well as many of its emerging market economies and Asian peers.
Das said a stable exchange rate is a beacon of financial and overall macroeconomic stability and market confidence.
Citing the divergent views on the exchange rate of the rupee and the adequacy of our forex reserves Das said the rupee is a freely floating currency and its exchange rate is market determined.
“Second, the RBI does not have any fixed exchange rate in mind. It intervenes in the market to curb excessive volatility and anchor expectations. The overarching focus is on maintaining macroeconomic stability and market confidence,” he said.
According to him, RBI’s actions helped in engendering investor confidence as reflected in the return of capital inflows since July.
“Over the medium term, the primacy of price stability embedded in our flexible inflation targeting (FIT) framework provides the anchor for exchange rate stability,” he remarked.
The RBI’s interventions in the forex market are based on continuous assessment of the prevailing and evolving situation.
Das also announced an increase of repo rate by 50 basis points to 5.90 per cent.
Reacting to that Anindya Banerjee, Vice President, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd said: “All in all, a non-event for the USDINR market. We expect USDINR to trade within a range of 81.40 and 82.00 levels on spot.”