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Business News/ Politics / Policy/  RBI calls for joint action to calm markets
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RBI calls for joint action to calm markets

Khan's comments follow calls from analysts for a new currency pact to soothe financial markets amid diverging policies by central banks in US, Europe and Japan

A file photo of RBI deputy governor Harun R. Khan. Photo: Aniruddha Chowdhury/MintPremium
A file photo of RBI deputy governor Harun R. Khan. Photo: Aniruddha Chowdhury/Mint

New Delhi: India’s central bank is calling for coordinated action by monetary authorities to address the turbulence that’s roiling foreign-exchange markets this year.

“It is in the interest of everyone to see that there is some coordinated action," Reserve Bank of India deputy governor H.R. Khan told reporters in New Delhi when asked whether any joint measures on currencies will be proposed at a Group of 20 meeting of finance ministers and central bankers. “When emerging countries get affected, the whole world gets affected," he said, without saying what he was proposing.

China’s deteriorating economy and falling oil prices have rattled global markets this year, driving stocks down and spurring exchange-rate volatility. India has been one of the most affected developing nations, with the rupee weakening 2.3% in the worst performance in Asia in 2016 and foreign funds pulling a net $1.7 billion from Indian stocks. Finance ministers and central bank chiefs from the G-20 nations will meet in Shanghai on 26-17 February.

Khan’s comments follow calls from analysts at Deutsche Bank AG and Bank of America Corp. for a new currency pact to soothe financial markets amid diverging policies by central banks in the US, Europe and Japan. China is burning through billions of dollars to prop up the yuan as growth slows and capital outflows reach unprecedented levels. India’s central bank has intervened on both sides of the foreign-exchange market, governor Raghuram Rajan said in Mumbai this week.

“As far as currency is concerned, we are proposing coordinated action," said Khan. “The current international situation is such that emerging nations can’t be ignored."

JPMorgan Chase & Co.’s Emerging Market Volatility Index, which measures expectations for currency price swings, has climbed from 11.41 to 12.45 this year and reached a four-month high this week. Bloomberg

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Published: 05 Feb 2016, 02:51 PM IST
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