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Informist, Friday, Feb. 7, 2025

 

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--RBI Malhotra: Rate at which rupee settles is function of demand, supply 
--RBI Malhotra: We should not look at day-to-day volatility for rupee 
--RBI Malhotra: Global uncertainty a higher worry than rupee fall 
--RBI Malhotra: Uncertainty is underlying cause for rupee to fall 
--RBI Malhotra: GDP forecast takes into account impact of rupee fall 
--RBI Malhotra: Latest dlr/rupee rate taken into account for projections 
--RBI Malhotra: FX policy consistent over the years, will continue 
--RBI Malhotra: Interventions in FX mkt focus on smoothening volatility 
--RBI Malhotra: We don't target a certain level for rupee's exchange rate 
--RBI Malhotra: Aim to smoothen excessive volatility in FX mkt 
--RBI Malhotra: Believe in mkt efficiency of Indian mkts 
--RBI Malhotra: Exchange rate policy remains consitent over the years 
--RBI Malhotra: Aim to ensure orderliness, stability in FX market

 

MUMBAI – The rupee's exchange rate is determined by market forces and the Reserve Bank of India believes in the efficiency of the market, Governor Sanjay Malhotra said while detailing the outcome of the Monetary Policy Committee's sixth bi-monthly meeting for 2024-25 (Apr-Mar) on Friday.

 

"Our stated objective is to maintain orderliness and stability without compromising market efficiency," he said. "The Reserve Bank believes in the efficiency of the market that we have in India for forex (foreign exchange)."

 

Malhotra said the central bank's interventions in the foreign exchange market focus on smoothening "excessive" and "disruptive" volatility rather than targeting any specific exchange rate level or band, and the exchange rate policy has remained "very, very consistent" over the years. "The exchange rate of the Indian rupee is determined by market forces, and we will continue with this policy," he said.

 

The governor's comments come at a time when the Indian currency has been weakening amid a globally strengthening dollar and strong foreign fund outflows. The rupee has depreciated over 2% against the dollar so far this year.

 

"The rate at which the rupee settles is a function of demand and supply," Malhotra said at the post-policy press conference. "We should really not be looking at day-to-day volatility, it is more of a long-term rate which we should be looking at."

 

He said the depreciation in the rupee was factored in when the Monetary Policy Committee unanimously decided to lower the policy repo rate, bringing it to 6.25% from 6.50%. He said a bigger concern for the central bank is the global uncertainties and weakening of the local currency, and appreciation of the dollar has to a great extent been due to the same. Global uncertainty has picked up since US President Donald Trump threatened to slap tariffs on countries running a trade surplus with the world's largest economy.

 

"Global uncertainties, even if the tariff trade war were not to carry out, but just the uncertainty itself is something which is worrisome, because that has a direct impact on growth, consumption expenditure decisions, investment decisions," he said. 

 

End

US$1 = INR 87.42

 

Reported by Pratiksha

Edited by Rajeev Pai

 

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