The Reserve Bank of India (RBI) Governor Sanjay Malhotra said the central bank will do “whatever is required” to ensure orderly movements in the foreign exchange market.
The RBI does not target any specific level for the currency, but the Governor emphasized in a media interview that the central bank stands ready to intervene if speculative pressures build up.
Malhotra said India’s central bank would do “whatever is required” to ensure orderly movements in the foreign exchange market. The rupee currently appears undervalued following a sharp depreciation of around 6 per cent since the West Asia conflict erupted on February 28.
“The RBI will do whatever is required to ensure orderly price discovery in the forex market,” he added.
The Governor said the RBI has enough tools in its arsenal, including nearly $700 billion in foreign exchange reserves, to curb any undue speculative movement.
“RBI’s primary mandate is to target inflation. If the evolving inflation trajectory provides policy space, we support growth,” he added.
The Indian rupee strengthened to a two-week high on Monday, rising 0.4 per cent to 95.2775 against the US dollar.
India’s foreign exchange reserves have declined by nearly $38 billion since the outbreak of the Iran conflict. Forex reserves have fallen from an all-time high of $728.5 billion in February to around $691 billion.