Rupee depreciation due to strengthening dollar, happened in orderly fashion: RBI Guv

NEW DELHI: While delivering the policy outcome, the RBI governor Shaktikanta Das on Friday said the rupee depreciation has happened in an orderly fashion and is due to strengthening of dollar, rather than a weakness in domestic macro fundamentals.

Das said that the domestic currency has fared much better than EM currencies, adding that the central bank remained watchful and focused on maintaining stability in rupee.



"Market interventions by the RBI have helped in containing volatility and ensuring orderly movement of the rupee. We remain watchful and focused on maintaining stability of the Indian rupee," he said.

Das comment came a day after IMF said the RBI’s intervention in the currency market should be limited to addressing disorderly market conditions and exchange rate flexibility should act as the main shock absorber.

The partially convertible rupee was trading at 78.99 per dollar, compared to 79.16 prior to the policy decision. The local unit had closed at 79.4650 in the previous session.

Das said RBI will remain vigilant on liquidity front and will conduct a two-way liquidity fine tuning operation.

The domestic currency has depreciated 4.7 per cent against the greenback so far this year.

The RBI said standalone primary dealers (SPDs) have played an important role in the development of financial markets in India. It announced two measures to further facilitate financial market development.

SPDs, it said, will be permitted to undertake transactions in the offshore rupee overnight indexed swap (OIS) market with non-residents and other market makers.

This measure, the RBI said, will supplement a similar measure announced in February this year for the banks. These measures are expected to remove the segmentation between onshore and offshore OIS markets and improve price discovery.

The RBI also proposed enabling SPDs to offer all foreign exchange market-making facilities as currently permitted to Category-I Authorised Dealers, subject to prudential guidelines. This measure will provide customers with a wider set of market makers to manage their foreign currency risk.

"This will also increase the breadth of the forex market in India," Das said.