The Hindu Business Line : `RBI buying dollars, not targeting any rupee level'

Dr Bimal Jalan, Governor, RBI, today told a gathering of information technology professionals at Nasscom 2002, that the RBI was buying ``foreign exchange in a major way''. Dr Jalan said the target was to build up forex reserves to cover all ``liquidity at risk'' for an extended period of time.

The RBI is not targeting any particular level for the rupee. It is, however, watching the exchange rate closely and would ensure orderly conditions in the market at all times.

``Even if the country faces tremendous uncertainties for a prolonged period, say for 12 to 18 months, we should be able to cover the entire liquidity at risk by reserves. This is also recognised as the prudent practice internationally,'' he said.

Even if the country faces prolonged uncertainties, ``we can cope with every payment, including all external loans, foreign institutional investors, import payments...every single external obligation''.

The foreign exchange reserves of the country have been climbing steadily for the past several weeks. At the end of the last week, the forex reserves stood at a record high of $49.252 billion.

Marketmen expect the reserves to cross the $50-billion-mark within a couple of weeks or, at the latest, by the end of the fiscal. The country's total external debt stands around $100 billion.

The rupee has, however, been steadily losing ground to the dollar over the past several days and has repeatedly tested historic lows. It depreciated more than 0.5 per cent in the past week alone.

The market has apparently been searching for the real value of the rupee and sentiment betrays a slight overvaluation of the currency in terms of the real effective exchange rate vis-a-vis its trading partners.

Dealers say it may weaken another half a percentage point against the dollar. The currency ended the day at Rs 48.70/71 per dollar.

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