Fall in rupee due to dollar strength and not weak macro fundamentals: RBI Guv Shaktikanta Das

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that the rupee's depreciation over the past few months is more because of the appreciation of the US dollar than the weakness in macroeconomic fundamentals. While presenting the monetary policy statement today, Das said that RBI intervention in the market has helped contain volatility and ensure orderly movement of the rupee.

In the year so far, the domestic currency has declined about 8 percent against the US dollar. In January, rupee was at 73.77 against the US dollar — it is now trading at 79.20 against the US dollar.

On July 19 this year, the rupee also touched its all-time low — 80 per dollar. Today ahead of the RBI’s policy meeting outcome, the rupee appreciated 46 paise to 78.94 against the US dollar in early trade. However, later, it has fallen to 79.16 a dollar.

“We remain watchful and focused on maintaining the stability of the Indian rupee,” said Das.

The recent decline of the rupee has been attributed to the continuous outflow of foreign investments, the rise in crude oil prices, the US Federal Reserve's tight monetary policy and the overall strength of the dollar. Global uncertainties due to the geopolitical crises brought on by the Russia-Ukraine war made this worse for the rupee.

“The Indian financial system remains resilient. This will help the economy in emerging out of the shadows of the pandemic and the impact of the war in Europe. While the banking system remains well capitalised and profitable, a deleveraged corporate sector augurs well for sustaining the recovery,” said Das in the monetary policy statement.

Additionally, he said that foreign portfolio investment became positive in July 2022 after remaining negative during the first quarter of 2022–2023. Along with a number of other actions taken in July, the Reserve Bank has also utilised its accumulated foreign exchange reserves to reduce exchange rate volatility.

Last month, to stabilise the rupee and attract foreign investments, the Reserve Bank of India (RBI) unveiled fresh measures, including easing rules for FPIs, interest rates cap removed for FCNR (foreign currency non resident account) and NRE (non-resident external account) term deposits and raising limits on external borrowings.