MUMBAI, May 25 (Reuters) – India’s central bank will do “whatever is required” to ensure orderly movements in the foreign exchange market, Reserve Bank of India (RBI) Governor Sanjay Malhotra told Mint newspaper in an interview.
Malhotra said the rupee currently appears undervalued following a sharp depreciation of around 6% since the Middle East war erupted on February 28.
Below are some of his key comments:
• The RBI does not target any specific level for the currency, Malhotra said, but emphasized that the central bank stands ready to intervene if speculative pressures build up.
• The RBI will do whatever is required to ensure orderly price discovery in the forex market, he added.
• The RBI has enough tools in its kit, including nearly $700 billion in reserves to quell any undue speculative movement.
• With recent depreciation, one could argue that the rupee has become undervalued, both in nominal as well as in REER (real effective exchange rate) terms.
• Once the situation in West Asia normalizes, the rupee could appreciate.
• We need to take measures to reduce our current account deficit, which the government has been addressing. Our capital account needs some improvement too.
• The RBI’s primary mandate is to target inflation. “If the evolving inflation trajectory provides policy space, we support growth.”
(Reporting by Ira Dugal; Editing by Sherry Jacob-Phillips)
sg.news.yahoo.com