MUMBAI — India’s central bank has zero tolerance for volatile and bumpy movements in the rupee and will continue to engage with the foreign exchange market to ensure the rupee finds its appropriate level, its chief Shaktikanta Das said on Friday.
The rupee has been hitting a series of record lows in recent weeks and broke past the psychological 80 per dollar mark earlier this week, 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,” Das said at a banking conference in Mumbai organized by the Bank of Baroda.
“We have zero tolerance for high volatility and bumpy movements.”
Das said the rupee’s movements have been relatively smooth and orderly due to the RBI’s actions in the foreign exchange market. By ensuring there are no sudden and volatile shifts, the RBI was keeping expectations anchored and the foreign exchange market functioning in a stable and liquid manner, he added.
“We will continue to engage with the forex market and ensure that rupee finds its level in line with its fundamentals.”
He said the central bank has been supplying dollars since there is a genuine shortage of dollars in the market.
On Friday, the rupee was last trading at 79.90/91 to a dollar, compared to its Thursday’s close of 79.9450.
Das also said the central bank has built its foreign exchange reserves for situations like these, noting that India has a substantial amount of foreign exchange reserves to handle the current crisis and there is no need to panic.
More broadly, the governor said India’s economy remains well placed and all high-frequency indicators have been pointing towards a steady revival.
However, on inflation he said that while it appears to have peaked, the situation remains volatile and the RBI was constantly reviewing it.
India’s annual consumer inflation remained above the 7% mark and the central bank’s 2%-6% tolerance band for the sixth month in a row in June but has come down from an eight-year peak of 7.79% seen in April.
Das said the central bank’s goal is and will continue to be to ensure a soft landing for the economy. (Reporting by Nupur Anand and Swati Bhat; Editing by Rashmi Aich and Sonali Desai)