Finance Minister Nirmala Sitharaman said on 13 October that while the Reserve Bank of India (RBI) would continue its efforts to curb volatility in the rupee but is not seeking to fix its value, as the currency faces pressure from external factors.
“The RBI is not trying to fix the rupee; it is trying to stop the volatility,” said, adding that the central bank’s measures would continue to ensure stability in the currency market.”
Sitharaman was speaking at the in the national capital. The forum is being organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News.
Referring to the RBI’s latest measures, announced two days earlier, the finance minister said the rupee had held firm and had . “These efforts from the RBI would continue. As I said, not to fix the rupee. We would appreciate if the rupee finds its own level,” she said.
Rupee appreciated on Tuesday
The rupee appreciated 82 paise to 94.96 against US dollar in early trade on Tuesday, supported by various aimed at reducing immediate dollar demand and curbing excessive positions in the foreign exchange market, news agencies said.
Forex traders said measures including a dedicated dollar window for oil marketing companies through designated banks and higher costs for certain foreign exchange hedging transactions, are expected to reduce dollar demand in the spot market and curb speculative positions against the rupee.
At the interbank foreign exchange market, the rupee opened at 95.53, then gained ground to touch 94.96, registering again of 82 paise over its previous close.
Rupee appreocated on Monday
On Monday, the rupee appreciated 93 paise, logging its steepest single-day gain in more than six months, to close at 95.78 against the US dollar.
“With the RBI’s measures supporting the rupee, we expect USD/INR to move towards 95.00–94.80 range in the near term,” CR Forex Advisors MD Amit Pabari said.
The RBI on Saturday tightened rules governing forex derivatives trades to curtail speculative bets against the rupee and asked banks to create a 20 per cent reserve for dollar purchases of over USD 2 million.
In another set of measures announced on Saturday on the derivatives front, the RBI said (AD) should not permit users to rebook any foreign exchange derivative contract involving the INR, whether deliverable or non-deliverable, which has been cancelled.
‘Most of the pressure comes from external challenges’
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading lower by 0.15 per cent at 102.43
Addressing concerns over capital outflows amid the rupee’s depreciation, Sitharaman said the currency’s decline over the past one-and-a-half years had been significant and was attributable to several factors, most of them external.
“I believe most of it is because of the challenges from outside,” she said, adding that the government was working to ensure that India’s macroeconomic fundamentals remained sound.
‘RBI would continue to address fluctuations’
The said the RBI would continue to address fluctuations in the rupee’s value against the US dollar, which she identified as a key challenge.
Sitharaman’s remarks come amid concerns over the rupee’s depreciation, capital outflows and the impact of external economic pressures on the Indian currency. The finance minister maintained that while the government would safeguard the country’s macroeconomic fundamentals, the RBI’s intervention was aimed at managing excessive volatility rather than defending a fixed exchange-rate level.
Brent crude, the global oil benchmark, was trading lower by 1.11 per cent at USD 105.47 per barrel in futures trade. On the domestic equity market front, Sensex climbed 305 points to 72,224.15, while the Nifty was up 93.40 points to 22,458.50.
Foreign Institutional Investors (FIIs) offload ed equities worth ₹1,708.48 crore on a net basis on Monday, according to exchange data.
On the macroeconomic front, retail inflation in the country rose sharply to 5.54 per cent in September on the back of high onion and other food prices, remaining just within the RBI’s tolerance band, government data released on Monday showed.
The (CPI) based headline inflation was 4.83 per cent in August, according to the National Statistics Office (NSO).
Fiscal discipline should not worry investors: FM
Sitharaman also defended Union government’s commitment to fiscal prudence, saying fiscal deficit management remained a priority for .
“Fiscal deficit is something very close to PM Modi’s heart. He has maintained fiscal prudence even as the chief minister,” she said adding that the prime minister had remained committed to fiscal discipline without compromising spending on health and education.
“Fiscal discipline is not going to be a matter which should worry investors,” Sitharaman said.
(With agency inputs)