RBI to iron out volatile, bumpy movements to ensure rupee finds its level: Das

RBI Governor says rupee holding up ‘well’ relative to advanced, EME peers

Reserve Bank of India (RBI) Governor Shaktikanta Das stressed on Friday that while the central bank was committed to ensuring that the rupee finds its level in line with its fundamentals and does not target any particular level for the rupee, it would intervene decisively to iron out any volatile or bumpy movements in the currency’s exchange rate.

“I would like to reiterate that we have no particular level of the rupee in mind, but we would like to ensure its orderly evolution and we have zero tolerance for volatile and bumpy movements,” Mr. Das said, referring to the RBI’s stance on the rupee’s recent depreciation against the U.S. dollar, while addressing a banking conference in Mumbai.

Asserting that the Indian rupee was ‘holding up well relative to both advanced and emerging market peers’ due to India’s ‘underlying fundamentals being strong, resilient and intact’, Mr. Das said the RBI’s actions, including measures to encourage inflows, had ensured that the rupee’s movements had been relatively smooth and orderly.

“By eschewing sudden and volatile shifts, we have ensured that expectations remain anchored and the forex market functions in a stable and liquid manner,” he added.

Underscoring the need to recognise that spillovers from global monetary policy tightening, the geopolitical situation, the still elevated commodity prices especially of crude oil, as well as the lingering effects of the pandemic had all combined to affect currencies worldwide, Mr. Das observed: “Even reserve currencies such as the Japanese yen, the euro, and the British pound sterling have not been spared”.

“Portfolio funds are selling off assets and fleeing to safe haven. Emerging market economies (EMEs) are particularly affected by capital outflows, currency depreciations and reserve drawdowns, complicating macroeconomic management in these countries,” he noted.

Mr Das said the impact of these overwhelming spillovers on India had been relatively modest.