The RBI emphasised that the rupee’s value is market-determined, reflecting India’s macroeconomic fundamentals. The bulletin, co-authored by Deputy Governor Michael Patra and others, underscored the central bank’s commitment to preventing excessive currency volatility by strategically deploying its $700 billion foreign exchange reserves.
Addressing criticism of its foreign exchange interventions, the RBI defended its approach, stating that such measures are calibrated to the economy’s size. Between February and October 2022, net interventions averaged 1.6% of GDP, a figure comparable to past crises.
Also read: Q2 slackness behind, economic outlook bullish, says RBI Bulletin
Officials reiterated that the central bank’s exchange rate policies have bolstered financial stability without compromising trade competitiveness. “India is focusing on enhancing export quality and technology rather than relying on artificial props like an undervalued exchange rate,” the bulletin noted.
Despite global challenges, the rupee remains one of the least volatile Asian currencies, with only a 1.5% decline against the dollar this year. The RBI expressed confidence in the rupee’s medium-term resilience, supported by robust macroeconomic fundamentals as global uncertainties ease.
The Indian rupee weakened to its all-time low on Thursday, pressured by likely foreign outflows from local stocks and renewed strength in the dollar as investors tempered hopes of aggressive rate cuts by the U.S. Federal Reserve.
Also read: Rupee hits record low hurt by weak local equities, buoyant dollar
The rupee declined to a low of 84.4275 in early trading, eclipsing its previous all-time low of 84.42. It was quoted at 84.4175 as of 10:30 a.m. IST, nearly flat on the day.
Likely intervention by the Reserve Bank of India helped the currency limit its losses, with traders citing strong dollar offers from state-run banks.
(With inputs from Bloomberg)
First Published: Nov 21, 2024 4:04 PM IST
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