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The RBI today said its intervention in the forex market, if any, would be limited to curbing volatility, but as of now, the situation does not call for any action even though the rupee has fallen to its weakest level in 28 months.
“We, at this point, do not see any intervention from a rate targeting view point. That is something that would reflect a change in policy stance, which we are not doing at this point,” the RBI Deputy Governor, Dr Subir Gokarn, said in an interview to a private Indian news channel here.
Economists and experts have suggested that the central bank should intervene in the Indian forex market to halt the sharp depreciation in rupee value.
The falling rupee has become a cause of concern for policymakers as it could further push up inflation, given that the country imports about 80 per cent of its crude oil requirement and pays for the same in dollars.
“If we do intervene at all, it would be with a very narrow perspective or narrow objective of smoothing of what might be a very volatile market situation, but nothing beyond that,” he further said.
The Deputy Governor’s remarks came even as the Indian currency fell to Rs 49.90 per US dollar in early trade on Friday, its lowest level since May 14, 2009. On Thursday, the rupee had shed 2.5 per cent to post its biggest single-day loss in nearly three years.
Tracking the meltdown in global stock markets, the rupee had on Thursday plummeted 124 paise to close at Rs 49.57/58 per US dollar, setting off alarm bells in policymaking circles, as the weak domestic currency will make imports costlier and fuel inflation.
The rupee is sliding on account of strong demand from importers and banks for dollars amid a sharp rise in the value of the currency to a seven-month high against major rivals in overseas markets. The greenback is being seen as a safe haven, especially at a time when risk aversion is sweeping through global financial markets.
Nevertheless, the decline in the rupee exchange rate has given merchandise and software exporters cause for cheer, as they will enjoy better realisation in rupee terms from their wares.
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