RBI steps in only to curb volatility: Chakrabarty
17 May 2012 3:02 AM GMT
As the rupee dipped to its all time-low of 54.49 to a dollar on Wednesday, leading to increasing calls for arresting its fall at any cost, the Reserve Bank of India (RBI) deputy governor K C Chakrabarty said the RBI intervenes in the forex market only to curb volatility and not the slide.
'We don't intervene to arrest the rupee fall, we intervene only to arrest the volatility, you must understand the difference,' Chakrabarty said.
The rupee has been depreciating for over a fortnight due to higher demand from importers and concerns over the widening current account deficit, and dipped to an all time low of Rs 54.46 to the dollar during trading earlier today. Yesterday, it was at an all-time closing low of 53.97 to the dollar despite reported massive dollar selling by the monetary authority.
In fact, the rupee has been on the downslide since last August when dollar became the most sought after currency.
Since then, the rupee lost nearly 24 per cent. Last 15 December, it had hit the life-time low of 54.30 in intraday trade. However, since January, the local unit has regained some lost ground, appreciating nearly 10 per cent.
But come April, it resumed its downward spiral on the back of a record high current account deficit of 4.3 per cent during the last quarter ending December and a high fiscal deficit, which touched 5.9 per cent against a projected 4.1 per cent in FY12.
'We don't intervene to arrest the rupee fall, we intervene only to arrest the volatility, you must understand the difference,' Chakrabarty said.
The rupee has been depreciating for over a fortnight due to higher demand from importers and concerns over the widening current account deficit, and dipped to an all time low of Rs 54.46 to the dollar during trading earlier today. Yesterday, it was at an all-time closing low of 53.97 to the dollar despite reported massive dollar selling by the monetary authority.
In fact, the rupee has been on the downslide since last August when dollar became the most sought after currency.
Since then, the rupee lost nearly 24 per cent. Last 15 December, it had hit the life-time low of 54.30 in intraday trade. However, since January, the local unit has regained some lost ground, appreciating nearly 10 per cent.
But come April, it resumed its downward spiral on the back of a record high current account deficit of 4.3 per cent during the last quarter ending December and a high fiscal deficit, which touched 5.9 per cent against a projected 4.1 per cent in FY12.
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