Rupee holding up well relative to advanced, emerging market peers: RBI Governor

Indian economy is relatively better placed amid grim global scenario, said the Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday, adding that the domestic currency rupee is holding up well relative to advanced and emerging market (EM) peers.

“RBI has been supplying US dollars to the market to ensure adequate supply of liquidity. Also, it is necessary to look at unhedged forex exposures factually, rather than being alarmed by it,” he said while speaking at a banking conference on Friday.

The governor said that the central bank has zero tolerance for volatile and bumpy movement of rupee and therefore the RBI actions so far have helped in smooth movement of the local currency.

The rupee has depreciated around 8% since the beginning of this year and has been hitting new record lows against the US dollar since the past few sessions. The currency has crossed the 80 level on the back of monetary policy tightening and the consequent FPI outflows from capital markets. India’s widening trade gap and capital outflows have also raised the risks for the domestic currency.

The recent declaration by the RBI to allow cross-border commerce transactions in rupees is seen by experts as a timely move and a step toward the internationalization of the currency.

The RBI, earlier in July, requested banks to make additional preparations for exports and imports to be invoiced, paid for and settled in the rupee. This was done to support the growing interest of the international trading community in the domestic currency and to encourage the expansion of global trade, with an emphasis on Indian exports.

A report by Reuters suggested that the RBI was prepared to sell another $100 billion to defend the rupee from rapid falls. The RBI’s currency reserves have failed by more than $60 billion from its peak of $642.450 billion in early September, in part due to valuation changes, but largely on the back of dollar selling intervention.

(With inputs from PTI)

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