Press "Enter" to skip to content

Have zero tolerance for wild swings in the forex market: RBI Governor Shaktikanta Das – Economic Times

The Reserve Bank of India (RBI) governor Shaktikanta Das on Friday said that the Indian Rupee is holding up well as compared to several developed economies and that the central bank has zero tolerance for wild swings in the forex market.

Speaking at the

Economics Conference, Das said that the inflation in India is stabilising and the forex reserves are adequate. “RBI has been supplying US dollars to the market to ensure there is adequate liquidity,” he said.

As per a report by Swiss brokerage UBS Securities, the forex reserves remain reasonable at USD 580 billion but down from the peak of USD 642.4 billion in September 2021 on valuation adjustment and RBI’s market intervention of over USD 40 billion plus in the spot and forward markets so far to support the rupee.

Currently, the forex reserves cover 95 per cent of external debt, up from around 70 per cent in FY13. Imports cover for reserves is at 10.5 months currently, much better than the seven months in FY13 but below the peak of 14.4 months in FY08, the report said. Further, the Rupee, which has lost 7.5 per cent so far this year against the US dollar, is expected to settle at the 80 level by March.

The RBI has been taking steps to curb the fall in Rupee. India’s forex reserves had dropped for five out of the past sixth straight weeks, on account of RBI’s likely intervention in the market to defend the depreciating rupee. Typically, the RBI intervenes in the market through liquidity management, including through the selling of dollars.

Das said that the central bank is not targeting a level of the Rupee. “Movements of the rupee have been relatively smooth and orderly We will continue to engage with the forex markets and will ensure that the rupee will find its optimal level as compared to its fundamentals,” he said.

“The Indian economy remains relatively better placed, taking cushion from its healthy economic fundamentals. Spillovers from the global monetary policy tightening, commodity prices, geopolitical risks have become overwhelming for the currencies world over,” Das said.

“Currencies of EMEs and some DEs are depreciating against the dollar due to safe-haven demand. Overall global situation remains grim,” he added.

On the performance of the economy, Das said that the high-frequency indications in July are looking very positive. Aggregate demand has improved and the rural demand is showing signs of a pick-up.

“Our approach is to deal with the problem of inflation squarely Our target is to have a soft-landing for the economy. Our target is to keep inflation around 4% over time so that the growth sacrifice is within manageable limits,” he said.

Das further said that the RBI will be reviewing the inflation projection of 6.7% for the year (FY23) during the upcoming MPC meet.