“Value of rupee is determined by the market forces”
On a day the rupee breached the 74-mark against the US dollar for the first time, RBI Governor Urjit Patel said Friday that the domestic currency is still better than its emerging market peers. He maintained that the value of rupee is determined by the market forces and the RBI does not have any “target or band” around any particular level of the exchange rate.
He said the foreign exchange reserves of USD 400.5 billion as of end September are sufficient to finance 10 months of imports. Patel’s comments came as the rupee crossed the 74-mark against the dollar on Friday afternoon after opening higher than its previous close at 73.52.
Addressing a press conference after announcing the fourth quarter monetary policy here, he said the rupee has experienced bouts of volatility since the monetary policy committee meeting in August. The country has not been immune to global spillovers from external factors, he said. “The rupee fall, in some respect, is moderate in comparison to several other emerging market market peers,” the governor said.
Ruling out any target for the currency, he said, “Our response to these unsettled conditions has been to ensure that foreign exchange market remains liquid with no undue volatility.” By the end of September, the rupee has depreciated in nominal effective terms by 5.6 per cent since the end of March, Patel said.
In real effective term, the rupee fall has been at 5 per cent, the governor said. In absolute terms, the rupee is down around 17 per cent since January this year. Forex reserves had touched a record of USD 426.028 billion in the week to April 13, 2018, but have been declining since then on account of RBI intervention in market to stem fall in the rupee.