The rupee’s fall to all-time lows and the decline in India’s forex reserves is not driven by capital outflows, but the spillover effects of a stronger U.S. dollar, senior officials said on Wednesday.
While the RBI had been intervening in the forex markets since Monday, the idea was not to hold or aim to keep the rupee at a certain level but to prevent ‘jerky’ moves, an official aware of the rationale for the interventions pointed out.
“There is no fixation about any particular value... it’s not as if there is an attempt to resist levels being breached, but they should not be jerky movements,” the official said, adding that the interventions had helped the currency appreciate to 77.25 to a dollar on Wednesday, from Monday’s record low of 77.46.
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Dismissing speculation that the forex reserves had fallen below $600 billion due to such market interventions, the official said the scale of interventions were not that large and the dip was mainly attributable to valuation losses in forex holdings in non-dollar currencies as the dollar was appreciating against advanced economy currencies as well.
“There are adequate reserves to fund 18 months of imports, FDI levels are as high as last year and foreign institutional investors are making a beeline for Indian debt now,” he asserted.
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