RBI promises to contain slide in rupee value | SupportBiz

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RBI promises to contain slide in rupee value

The rupee recovered after falling to its third straight daily record low against dollar on May 18, and the Reserve Bank of India (RBI) promised more intervention to curb any future slide. The rupee slumped to a new intra-day low of 54.91 against a dollar during the day. This was the third consecutive record low of rupee in the last three days. The rupee recovered in late trading and ended the day at 54.42 against a dollar compared to the close of 54.47 on May 17.

The rupee had hit a low of 54.60 against a dollar on May 17, surpassing the previous day's record of 54.52.

"What we really want to ensure is stability...that is the objective of both of our interventions and the other administrative actions that have been taken," RBI Deputy Governor Subir Gokarn told reporters on the sidelines of a programme organised by the Indian Chamber of Commerce (ICC).

"Containing volatility is clearly our objective," he added.

Gokarn claimed that the steps taken by the central bank had helped in stabilising the rupee. "If we need to take more steps, clearly that will be in that direction," he stated.

Increased demand for the US currency from importers and capital outflows was adding pressure on the Indian currency. It has fallen over 10 percent since its February peak.

Gokarn said that the rupee has been under severe pressure of late, largely due to global factors arising out of political uncertainty in Greece.

"Now, in the last two or three days, the pressure has been global. Rupee responds to very strong global forces," he said.

The RBI has taken a series of measures in the last few weeks to curb the rupee slide. The RBI has asked banks to sell half of the foreign currencies in their accounts. In a bid to attract money from overseas, the RBI has raised the interest ceiling that local banks can offer to overseas Indians in forex accounts.

The RBI has opened a direct dollar window for oil companies, which are worst hit because of the weakness in the domestic currency as they have to pay higher money for the same quantum of import. "At the same time, we do not want to come in the way of any end-use of foreign currencies which the importers or anybody else would fight for its constraints," Gokarn said.

"So, we want to balance for these objectives…we want to be sure that when we take any action, there is some hope for impact," he said, adding that, currently, the country's foreign exchange reserves were not a cause for worry.

"We have reserves that adequately cover our obligations...so the reserve adequacy is something that I think we should not be worrying for," he added.