RBI yet to intervene to arrest rupee slide

“The exchange rate that we have seen over the last couple of weeks, particularly in the last 3-4 days, is driven by the global dynamics,” he told reporters here.

To what extent the rupee moves and in which direction will depend on credible resolution of the external situation, particularly the sovereign debt problem in Europe, he said.

“Our policy is that if the macro-economic situation is impacted due to the exchange rate fluctuation or undue volatility we will have to intervene. We are yet to decide whether to intervene or not at the moment,” he added.

Subbarao further said intervention in the forex market would be in accordance with the RBI’s policy.

“Of course, RBI can intervene. RBI will intervene when it is consistent with the policy. But in real terms I cannot tell (when the Reserve Bank of India (RBI) will intervene),” he added. The rupee has been weakening for quite some time and depreciated to a lifetime low of Rs 52.73 against the US dollar in early trade today amid sustained demand for the American currency from banks and importers.

Dollar gains against other currencies overseas also put pressure on the Indian rupee.
Rupee depreciation is affecting corporates which have raised about $30 billion (Rs 1,50,000 crore) through ECB route during January 2011 and till date. During the period, the rupee has moved from Rs 44.67 to Rs 52.70 level or 18 per cent against the US dollar.

Talking on the same topic RBI Deputy Governor Subir Gokarn told reporters in Mumbai that the sharp depreciation of the rupee is “disruptive”. He said any action to arrest the fall will be guided by medium-term considerations. “We don’t really have a target or a rate in mind. It’s moving as per market dynamics. It (fall in the value of the rupee) is disruptive, there is no question. There (will be) impact on our import bill, particularly for energy. It’s having an impact on companies and it is a problem,”

The immediate impact of the fall in the value of rupee, he said, will be on the inflation rate, which has been hovering near the double-digit mark for several months.