Kolkata: The Reserve Bank of India (RBI) will continue to use a mix of intervention and administrative steps to protect the rupee, a deputy governor said, adding the central bank has adequate reserves to meet its obligations.
“The approach over the last few months have been a combination of intervention at times when we have felt it will help us stabilise, and some administrative action. This is the approach that will work now,” deputy governor Subir Gokarn said on the sidelines of a banking event in Kolkata on Friday.
The rupee fell to a life-time low of 54.91 to the dollar on Friday, its third consecutive daily record low, and is the worst performer among Asian currencies so far this year.
A file photo of RBI deputy governor Subir Gokarn.
Gokarn said the central bank will not hesitate to take more steps to stem the falls in rupee if needed.
“I think the steps we have taken have all contributed in some way to stabilising, and if we need to take more steps, it will be clearly in that direction,” he said.
A slew of factors including rising imports, shrinking inflows, widening current account and fiscal deficits and policy stalemate have combined to pound the rupee since its 2012 peak against the dollar in mid-February.
Global risk aversion due to the euro zone crisis and Greece’s political uncertainty have hit Asian assets, including the rupee, hard this week.
However, a slew of administrative measures by the RBI in recent weeks has not been able to prevent the sharp fall in the rupee.
“In last 2-3 days, pressure has been global and the currency has responded to that. We want to ensure that if we take any action there is some scope of impact,” Gokarn said.
A Reuters poll on Tuesday showed analysts expect the rupee to hover near record lows against the dollar for the next month or so, despite already falling over 10% since its 2012 peak in February.
The RBI has sold $20.69 billion in spot markets from the start of September through March and has separately sold dollars in the forwards market to defend a battered rupee.