RBI promises more intervention to curb rupee slide

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SME Times News Bureau | 19 May, 2012
The rupee recovered after falling to its third straight daily record low against dollar Friday and the Reserve Bank of India (RBI) promised more intervention to curb any future slide.

"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) here.

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

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 had hit a low of 54.60 against a dollar Thursday, surpassing previous day's record of 54.52.

The rupee recovered in late trading and ended the day at 54.42 against a dollar compared to Thursday's close at 54.47.

Gokarn claimed 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."

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 the rupee was under severe pressure in the last three days 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 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 that in mind the reserve adequacy is something that I think we should not be worrying for," he added.