Even as the domestic currency rupee plunged to a record low, and fell below the 74-mark against the USD for the first time ever, RBI governor Urjit Patel said that rupee fall is moderate in comparison to emerging markets peers. “Depreciation of Rupee against US Dollar has been comparatively moderate in comparison to currencies of other EMEs (emerging markets economies),” he said. In the press conference, Urjit Patel said that the RBI has been trying to ensure the foreign exchange market remains liquid and is not targeting any particular level.
“The RBI’s response to these unsettled conditions has been to ensure the foreign exchange market remains liquid with no undue volatility. There is no target or band around any particular level of the exchange rate which is determined by the market forces of demand and supply,” he said. On Friday afternoon, the rupee extended its losses to hit a record low of 74.20 rupees after the RBI held its policy rate unchanged. The rupee has lost nearly 14% so far this year.
Immediately following RBI’s decision to keep repo rate unchanged in its fourth bi-monthly monetary policy, the domestic currency plunged below the 74-mark, even as the domestic stock market reeled under pressure, with the Sensex tanking more than 500 points, to hit an intraday low of 34,202. The 30-share index plunged to a six-month low, to end at 34,376.99, down by 792 points.
“The key takeaway is that the MPC remains focused on inflation control. From the market’s perspective, the expectation was that the RBI will do something for the INR depreciation as well. They have shown that inflation control remains their objective,” Tirthankar Patnaik, India Strategist, Mizuho Bank told Reuters.
The rupee has slumped in recent months amid a global rise in oil prices and a sell-off in emerging markets. It has fallen more than 13 percent since January, making it the worst performing major Asian emerging market currency, Reuters reported.