The Reserve Bank of India (RBI) will continue to stand for the rupee’s stability and will not allow any knee-jerk depreciation of the currency against the dollar, a deputy governor of the central bank said on June 24.
“We don’t know where the rupee will be, even the Fed (US Federal Reserve) does not know where the dollar will be. But be sure of one thing, we will stand for its stability and we are doing it on a ongoing basis even as we speak,” Michael Patra said at an event in New Delhi.
“We are there in the market; we will not allow disorderly movements in the rupee. We have no level in mind, but we will not allow jerky movements,” Patra said.
The amount of depreciation of the rupee is one of the least in the world, he added.
The rupee has been depreciating against the dollar steadily following aggressive rate hikes by the US Federal Reserve. The rupee had closed at a record low of 78.39 to the dollar on June 22 and is down over 5 percent in 2022.
The root cause of the rupee’s distress can be found in elevated oil prices, as India meets almost 85 percent of its fuel needs through imports. The persistent snags in global supply chains, worsened by the war between Russia and Ukraine, have meant that prices of goods and services are likely to stay elevated. The incessant dollar outflows from Indian equity and bond markets have kept the rupee under pressure.RBI intervenes in the forex market to prevent one-way moves in the rupee. RBI’s foreign exchange reserves stood at $596.46 billion as on June 10.