When compared to other emerging market currencies, the Indian rupee has been rather resilient. However, it has been falling since the devaluation of the Chinese yuan.
On Friday, it closed at a fresh two-year closing low of 65.83 per US dollar versus 65.54 per dollar on Thursday.
However, finance secretary Rajiv Mehrishi is not too perturbed by the fall. He says while the rupee has devalued against the dollar, it has appreciated against other currencies. "The other thing to keep in mind is what affects exports is not what the nominal rate of the dollar is, but what is the real effective exchange rate (REER) of the rupee," he told CNBC-TV18.
Given the low inflation, he does not think the current rupee movements would significantly impact the real value.
Below is the verbatim transcript of Rajiv Mehrishi's interview with CNBC-TV18's Sapna Das.
Q: What do you have to say about the current market volatility?
A: Market in any case is determined by so many multiple factors that it is impossible to say why the market is nervous or not nervous. I believe towards the close of the day today the market did recover substantially. Market takes into account all sorts of cues and so it is impossible to say why it is reacting.
As far as India's reactions to world developments are concerned, I would say this is work in progress, this is not one time.
Q: New norm in terms of the exchange rate is very different that what it was earlier during the 2013 rupee crisis, your thoughts?
A: The rupee is not a controlled currency. Its value is determined by the markets. It has been so for the last 25 years. So, to give an absolute figure of what one is comfortable with or not comfortable with is impossible because it depends on so many other things. What I would say is that two things need to be kept in mind, one is that while the rupee is devalued against the dollar, it has actually appreciated against the other currencies.
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