Armed with record foreign-exchange reserves, RBI Governor Shaktikanta Das has been very vocal about the need to protect the economy from risk-off events by tamping down on currency volatility. Reserves swelled past $700 billion last month as the central bank bought inflows into the nation’s equities and bonds this year.
“We want to prevent excessive volatility within a short period,” Das said in a speech last month in Singapore. “We want a kind of orderly depreciation or appreciation. We do intervene in the market with this approach.”
IDFC FIRST Bank expects the rupee to remain around 84 to the dollar by December. The currency has fallen about 1% this year. Barclays Plc expects the rupee to drop toward 84.40 per dollar in a staggered manner on the back of a rise in crude prices, record gold prices, a stronger dollar as well rising risk aversion, it said in a note.
“RBI intervention has focused on limiting two-way volatility in the dollar-rupee,” said Gaura Sen Gupta, chief economist at the lender. “Adequate FX reserves will enable RBI to limit volatility in the pair.”
