India cenbank “correct” to use FX reserves to tackle rupee volatility

MUMBAI: The Reserve Bank of India (RBI) is justified in using the country’s foreign exchange reserves to smooth out volatility in the rupee’s moves against the dollar, a member of the Economic Advisory Council said on Monday.

“I think that the RBI is correct to use the FX reserves to smooth movement in the INR/USD... There is no point targeting a INR/USD level when USD is appreciating against all other majors,” Sanjeev Sanyal told the Reuters Global Markets Forum (GMF) in an interview. “Longer term, we need to maintain overall macro-stability and allow the cycle to play itself out,” said Sanyal, who was previously India’s chief economic adviser. The Council he now sits on advises Prime Minister Narendra Modi and his government on economic policy.

The Indian rupee has fallen around 7.4% against the dollar year-to-date, to trade near a record low of 80.0650.