Central bank reiterates market-determined exchange rate stance as rupee volatility spikes amid global uncertainty
The Reserve Bank of India (RBI) on Wednesday clarified that its interventions in the foreign exchange market are aimed solely at curbing excessive volatility and not at targeting any specific level of the rupee.
Speaking during the monetary policy announcement, RBI Governor Sanjay Malhotra said the central bank’s exchange rate policy remains unchanged and consistent with its long-standing commitment to a market-determined currency.
“Intervention in the foreign exchange market is aimed at smoothing excessive and disruptive volatility without targeting any specific level or band of the exchange rate,” Malhotra said.
The clarification comes amid heightened fluctuations in the Indian rupee in recent weeks. The currency, which was trading around 91 against the US dollar at the beginning of March, weakened past the 95 mark during the month before recovering to around 92.5 currently.
Despite stronger macroeconomic fundamentals, the governor noted that the rupee depreciated more in the last financial year compared to the previous year’s average trend.
Reaffirming the RBI’s approach, Malhotra emphasised that the central bank does not seek to defend any particular exchange rate level. Instead, it intervenes only to prevent disorderly market movements that may not align with underlying economic fundamentals.
He also highlighted the RBI’s focus on preventing “self-fulfilling expectations” in currency markets, where sharp volatility can trigger further speculative pressures.
The central bank’s stance reflects a calibrated approach—allowing the rupee to adjust in line with global and domestic factors while stepping in to ensure stability and orderly market conditions.
The remarks come against the backdrop of ongoing global uncertainties and geopolitical tensions that have contributed to increased volatility across currency markets.
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