Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Thursday that the central bank does not target any level of rupee, and the recent depreciation of the domestic currency against the US dollar is due to demand for the greenback.
The RBI Governor said the Reserve Bank has "very good" buffers of foreign exchange reserves, and there is no need for concern on the external sector.
Delivering the VKRV Rao Memorial Lecture at the Delhi School of Economics, Malhotra said the foremost priority of the RBI is to ensure financial stability in the system, and the central bank is trying to simplify regulations, where possible, while maintaining necessary safeguards and guardrails.
Replying to a question on depreciation of the rupee against the dollar, he exuded confidence that India will have a "good trade deal" with the US, and that would relieve the pressure on the country's current account balance. He said the recent depreciation of the Indian rupee is trade-related and due to US tariff issues.
"We do not target any level. Why is the rupee depreciating? (It) is because of the demand...It's a financial instrument, and there is a demand for dollars, and if the demand for dollars goes up, the rupee depreciates; if the demand for rupee goes up, dollar comes down, then it appreciates," Malhotra said.
The rupee depreciated 23 paise to close at 88.71 against the US dollar on Thursday on broad strength of the American currency and fading odds of a rate cut by the US Federal Reserve.
Forex traders said the dollar has staged a rally, moving above the 100 level, after the US Federal Reserve minutes indicated that most officials were opposed to a rate cut in December, following the October cut. Responding to another query on the banking sector, the RBI Governor said that the way Indian banks are performing, very soon a few of them will be among the top 100 global lenders.
Also read: RBI stance cautionary, yet laced with courage: Sanjay Malhotra
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