The rupee’s fall to all-time lows and India’s foreign exchange reserves decline were not due to capital outflows but rather to the spillover effects of a stronger US dollar, senior officials said on Wednesday.
While the RBI has been intervening in forex markets since Monday, the idea wasn’t to hold or keep the rupee at any particular level, but to prevent “jerky” moves, dismissed an official aware of the rationale behind the interventions , thereupon.
“There’s no fixation on any particular value… it’s not like trying to resist breaking levels, but there shouldn’t be any jerky movements,” the official said, adding that the interventions helped that the currency appreciated to 77.25 against the dollar on Wednesday, from Monday’s record low of 77.46.
Denying speculation that foreign exchange reserves had fallen below $600 billion as a result of such market interventions, the official said the scale of the interventions was not that great and the decline was mainly due to valuation losses on non-dollar currency foreign exchange holdings as the dollar also appreciated against advanced economic currencies.
“There are sufficient reserves to fund imports for 18 months, FDI levels are as high as last year, and foreign institutional investors are now eyeing Indian debt,” he claimed.
