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Zero Tolerance For Indian Rupee Volatility

Zero tolerance For Indian Rupee Volatility
Photo Courtesy: Reuters

The Central Bank of India has zero tolerance for volatile and bumpy movements in the rupee. It will continue to engage with the foreign exchange market to ensure the rupee finds its appropriate level, it’s Chief Shaktikanta Das. The rupee has been hitting record lows recently and broke past the psychological 80 per dollar mark earlier, prompting heavy dollar selling intervention from the Reserve Bank of India (RBI). “We have no particular level of rupee in mind, but we would like to ensure orderly evolution,” Mr. Das said at a banking conference in Mumbai organized by the Bank of Baroda. But, he mentioned, “We have zero tolerance for high volatility and bumpy movements.”

He further said the rupee’s movements have been relatively smooth and orderly due to the RBI’s actions in the foreign exchange market. He added that by ensuring there are no volatile sudden shifts, the RBI was keeping expectations anchored and the foreign exchange market functioning in a stable and liquid manner. He stated, “We will proceed to engage with the forex market. We are ensuring that the rupee finds its level in line with its fundamentals.”

The Central Bank has been supplying US dollars since there is an exact shortage of dollars in the market. As a result, on July 22, 2022, the rupee was last trading at 79.90/91 to a dollar, compared to its earlier day’s close of 79.9450. He also said the Central Bank had created its foreign exchange reserves, noting that India has a substantial amount of foreign exchange reserves to control the current crisis, and there is no need to worry. More extensively, the governor said India’s economy remains well placed, and all high-frequency indicators have been pointing towards a steady revival.

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