The rupee has recovered to trade at 63 level after hitting its life-time low of 68.85 towards August-end.
"The rupee at the current level is well corrected. Stability is returning to the foreign exchange market. As capital flows return and as CAD begins to fall, this tendency will strengthen," Rangarajan said while releasing Economic Outlook for 2013-14.
"Ultimately the value of rupee depends upon the level of the current account deficit, the level of capital flows and what is happening in the rest of the world. Therefore, it is a combination of the factors that ultimately that impact the value of rupee," he said.
The domestic currency jumped 425 paise in five straight sessions starting September 7 on optimism sparked by steps announced by RBI Governor Raghuram Rajan, who took over on September 4, to rescue the battered financial markets.
Asked about the impact of likely tapering of quantitative easing, if announced, by Fed next week, Rangarajan said, "I believe that foreign exchange markets have already digested it. All the impact we have seen is in terms of what the Fed will do."
Stating that there is no unique way for determining what the appropriate value of the rupee, he said many steps have been taken recently in order to stabilise the rupee and allay the fears of investors and to restore the confidence in the economy.
The rupee was trading at 63.4 level at closing stages of today's trade at Inter-bank Foreign Exchange Market.
Stability is returning to the foreign exchange market as a consequence of various steps taken to reduce volatility in the foreign exchange market, Rangarajan said.
FII flows have been the one of the factors responsible for mounting pressure on the rupee, he said. In April and May, the FII inflows were very positive but since May more particularly after May 22 statement regarding tapering of the quantitative easing, there have been outflows on FII accounts.
Outflows continued till July and August. After September, the net outflow in the current fiscal is negative to the tune of USD 5.1 billion, he said.
Last years inflows were to the tune of USD 27 billion. In 2011-12, it was USD 17 billion.
"The fact that up to the end of August it is negative, means that flows need to be positive in the rest of the year so that we can get the net positive inflows of USD 2.7 billion dollar," he said.
The rupee has depreciated since May 22, he said, adding, it has happened not in India alone.
In 2012-13, India had CAD of 4.8 per cent of the GDP but the capital flows were adequate not only to cover CAD but to add to the reserve something like USD 3.2 billion.