Indian govt not averse to weaker rupee vs dollar – source

The Indian government is not averse to a weaker rupee in line with global market fundamentals, a senior official told Reuters, at a time when central bank intervention has sought to mitigate the depreciation of the Indian currency.

The comments come amid aggressive rate hikes from the US Federal Reserve, which raised rates by 75 basis points overnight and vowed to fight inflation.

The Fed’s decision sent the dollar to a new 20-year high and the rupee to a record low of 80.28 on opening.

“A weakening rupee in line with market fundamentals is not a cause for concern for us,” the government official, who asked not to be named, told Reuters.

“It can act as a natural stabilizer for the economy, helping to reduce imports and keep exports competitive,” the official added.

The Treasury declined to comment.

The Reserve Bank of India sold dollars to ease depreciation pressures on the rupee from the strengthening dollar and foreign portfolio outflows.

In July alone, the central bank sold a net $19 billion from its reserves to prevent the rupee from falling well below 80.

In addition to spot market intervention, the RBI’s forward dollar holdings have fallen to $22 billion from $64 billion in April.

On Sept. 5, RBI Governor Shakkanta Das said his aim is to anchor expectations and allow the exchange rate to reflect fundamentals rather than overshoot amid the extraordinary events that are constantly happening around the world. Indian govt not averse to weaker rupee vs dollar – source

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