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RBI Governor: Forex Intervention Only to Curb Rupee Volatility, Not Target Level

RBI Governor Sanjay Malhotra has reaffirmed the central bank's foreign exchange policy, stating its interventions are solely to curb excessive market volatility and not to defend a specific rupee level. The statement comes after the rupee experienced significant fluctuations, breaching 95 against the US dollar before stabilizing around 92.5. He emphasized the policy remains aligned with a market-determined currency, with the RBI acting only to prevent disruptive movements unjustified by fundamentals. The focus is on maintaining orderly conditions amidst global uncertainties, not artificially controlling the rupee's value.

Key Points: RBI Says Forex Intervention Aims to Curb Volatility, Not Rupee Level

  • Reiterates market-determined exchange rate policy
  • Interventions target excessive volatility, not specific levels
  • Rupee saw recent volatility but has stabilized
  • Policy aims to prevent self-fulfilling disruptive expectations
2 min read

RBI Governor says forex intervention only to curb volatility not targeting specific level of Rupee

RBI Governor Sanjay Malhotra clarifies the central bank's forex policy, stating interventions aim to smooth excessive volatility, not target a specific rupee exchange rate.

"intervention in the foreign exchange market is aimed at smoothing excessive and disruptive volatility without targeting any specific level - Sanjay Malhotra"

Mumbai, April 8

The Reserve Bank of India on Wednesday reiterated that its intervention in the foreign exchange market is aimed solely at curbing excessive volatility and not at targeting any specific level of the rupee.

Speaking during the monetary policy announcement, RBI Governor, Sanjay Malhotra said, "Despite the stronger macroeconomic fundamentals, the Indian rupee in the last financial year depreciated more than average in the previous year.... our exchange rate policy remains unchanged. Specifically, intervention in the foreign exchange market is aimed at smoothing excessive and disruptive volatility without targeting any specific level or band of price for the exchange rate."

The statement comes at a time when the Indian rupee has witnessed significant fluctuations in recent weeks. The rupee was trading at around 91 per US dollar at the beginning of March but saw heightened volatility during the month, breaching the 95 mark against the dollar at one point.

However, the currency has since stabilised and is currently trading at around 92.5 per US dollar.

The RBI Governor noted that despite stronger macroeconomic fundamentals, the rupee depreciated more than the average seen in the previous year during the last financial year.

Reaffirming the central bank's stance, he said the exchange rate policy remains unchanged and is aligned with the long-standing principle of a market-determined currency.

He emphasised that the RBI does not aim to defend any particular level of the rupee but intervenes only to prevent excessive and disruptive movements that may not be justified by economic fundamentals.

The central bank also highlighted that it will continue to act judiciously to ensure that volatility does not lead to self-fulfilling expectations that could further amplify currency movements.

The remarks indicate that while the RBI remains watchful of sharp fluctuations in the rupee, it is not attempting to artificially control its value.

Instead, the focus remains on maintaining orderly market conditions and preventing undue volatility, especially in the backdrop of global uncertainties and geopolitical developments that have impacted currency markets.

The recent cooling of the rupee from its peak volatility levels suggests that market conditions have stabilised to some extent, even as the RBI continues to monitor the situation closely.

- ANI

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Reader Comments

R
Rohit P
Good to have clarity. The volatility last month was worrying for my import business. Knowing RBI is there to prevent "disruptive" moves is a relief. Hope they continue to act judiciously as they said.
A
Aditya G
While I understand the policy, a slightly stronger rupee would help control inflation, no? Petrol prices are already so high. Maybe a *little* more support wouldn't hurt the common man. Just a thought.
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Sarah B
As an expat working here, currency stability is key. The RBI's stance is actually very mature and similar to other major central banks. It prevents panic and speculative attacks. Smart move.
K
Karthik V
Market-determined is the right way. We shouldn't waste forex reserves defending an artificial number. Let the rupee float, but with RBI as a guardrail against chaos. Our fundamentals are good, we should trust them.
M
Meera T
The statement is reassuring, but actions matter more. When it hit 95, there was genuine worry. Glad it's stabilized around 92.5 now. Hope the global situation doesn't force their hand. Fingers crossed! 🤞

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