Rupee should be allowed to find its level: RBI governor Shaktikanta Das
Mumbai, Dec 7, 2022
The rupee should be allowed to find its level and it was important to make an objective assessment of the moves on the currency, the Reserve Bank of India governor Shaktikanta Das said on Wednesday.
"In this complex world, with both push and pull factors at play, the INR - which is market-determined - should be allowed to find its level and that is what we have been striving to ensure," Das said, while announcing the central bank's monetary policy decision to raise its key lending rate by 35 basis points (bps).
It was important to assess the rupee's movement in the context of global and domestic macroeconomic and financial market developments, Das said.
Das pointed out that during the recent appreciation in the US dollar, the rupee's movements have been the "least disruptive," relative to peers.
The rupee has appreciated by 3.2 per cent in real terms so far this financial year - from April to October, Das said.
For the calendar year so far, the rupee is down about 11% against the dollar, broadly in line with other major Asian currencies such as the offshore Chinese yuan and the Korean won.
The RBI has been intermittently intervening in the foreign exchange market to keep the rupee's volatility in check. The currency dropped below 83 to the dollar to hit a record low in October. It has since recovered to 82.56.
The slide in the rupee was in part due to the dollar's rally against major and emerging market currencies on account of the US Federal Reserve's aggressive rate hikes. This has impacted inflows into India and other emerging economies.
"It cannot be the case that their (the Fed's) monetary policy will be tightened endlessly. When the tightening is over, the tide will surely turn," Das said.
"Capital flows to India will improve and external financing conditions will ease."
The Fed's rate is expected to peak at around 5%. It is currently at 3.75%-4% and the US central bank is widely expected to raise rates by 50 bps next week.