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RBI ‘Correct’ to use forex reserves to tackle rupee volatility
July 26, 2022
“I think that the RBI is correct to use the FX reserves to smooth movement in the INR/USD… There is no point targeting a INR/USD level when USD is appreciating against all other majors,” Sanjeev Sanyal told the Reuters Global Markets Forum (GMF) in an interview.
“Longer term, we need to maintain overall macro-stability and allow the cycle to play itself out,” said Sanyal, who was previously India’s chief economic adviser.
The Indian rupee has fallen around 7.4% against the dollar year-to-date, to trade near a record low of 80.0650.
The dollar has risen about 11.2% against a basket of currencies as markets brace for more U.S. interest rate hikes amid surging inflationary pressures and signs a weakening global economy.
Sanyal also said India’s inflation was almost entirely imported and, as an oil importer, something it could do little in the short term to control. Global oil and other energy costs have spiked this year, driven higher by the impact of the war in Ukraine and broader supply chain issues.
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