RBI will act to curb excessive volatility in rupee, says RBI governor

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RBI governor Shaktikanta Das, in a press conference after the monetary policy committee (MPC) meeting, said on Wednesday that the central bank will continue to act to curb excessive volatility in exchange rate.

“The story of the Indian rupee is one of resilience and stability and we will continue to act with excessive volatility of exchange rate and orderly evolution of exchange rate,” Das said in the press conference.

Experts echoed the view with an emphasis on foreign exchange.

“We note that while the governor justified the rupee’s resilience, a relatively dovish tone would not have augured well for INR, which has seen a sharp correction vs its peers in the last couple of days,” said Madhavi Arora, Lead Economist, Emkay Global Financial Services.

This has been on account of the already-low forward premia in forex and signalling a pause would have further pressured the FX forward premia on the downside, making carry trades less attractive for foreign portfolio investors (FPIs), implying fears of unwinding of these trades, ceteris paribus (with other conditions remaining the same),” said Arora.

The Indian currency has fallen nearly 12 percent in 2022 and breached the 80-mark in July and went on to set record lows, touching 83 to a dollar late in October.