The rupee has depreciated by 7.4 per cent against the US dollar during the current financial year (up to September 28) even as the US Dollar has appreciated by 14.5 per cent against a basket of major currencies, according to RBI Governor Shaktikanta Das.
The appreciation of the US Dollar has caused turmoil in currency markets globally, he said.
Das emphasised that the movement of the Indian Rupee (INR) has, however, been orderly compared to most other countries.
He observed that the rupee has depreciated by 7.4 per cent against the US dollar during the same period—faring much better than several reserve currencies as well as many of its EME and Asian peers.
The Rupee had hit an all-time low of 81.94 per dollar on September 28. It closed at 81.55 on September 29.
“A stable exchange rate is a beacon of financial and overall macroeconomic stability and market confidence.
“...First, the rupee is a freely floating currency and its exchange rate is market determined. Second, the RBI does not have any fixed exchange rate in mind. It intervenes in the market to curb excessive volatility and anchor expectations,” he said.
RBI’s overarching focus is on maintaining macroeconomic stability and market confidence.
“Our actions have helped in engendering investor confidence as reflected in the return of capital inflows since July. Over the medium-term, the primacy of price stability embedded in our flexible inflation targeting (FIT) framework provides the anchor for exchange rate stability.
“Third, our interventions in the forex market are based on continuous assessment of the prevailing and evolving situation...The aspect of adequacy of forex reserves is always kept in mind. The umbrella continues to be strong,” Das said.
The Governor emphasised that India’s foreign exchange reserves at $537.5 billion as on September 23, 2022 compares favourably with most peer economies.
“About 67 per cent of the decline in reserves during the current financial year is due to valuation changes arising from an appreciating US dollar and higher US bond yields.
“Incidentally, there was an accretion of $4.6 billion to the foreign exchange reserves on balance of payments (BOP) basis during Q1:2022-23...In the final analysis, we remain confident of meeting our external financing requirements comfortably,” he said.