No point targeting INR/USD level when USD is appreciating against all other majors: EAC member
No point targeting INR/USD level when USD is appreciating against all other majors: EAC member
A member of the Economic Advisory Council on Monday said the Reserve Bank of India (RBI) is justified in using the country’s foreign exchange reserves to address volatility in the rupee’s movement against the dollar.
Sanjeev Sanyal told Reuters Global, “I think the Reserve Bank of India is right to use foreign exchange reserves to smoothly move to INR/USD… there is no point in targeting INR/USD levels when USD It is appreciating compared to all other big companies.” Market Forum (GMF) in an interview.
Mr. Sanyal, formerly India’s Principal Economic Adviser, said, “In the long term, we need to maintain overall macro-stability and allow the cycle to turn on its own.”
The council he now sits on advises Prime Minister Narendra Modi and the government on economic policy.
The rupee has fallen nearly 7.4% year-on-year against the dollar but on Monday gained 16 paise to 79.76 compared to the previous session.
The dollar is up about 11.2% against a basket of currencies as markets rise higher in US interest rates amid inflationary pressures and signs of a weakening global economy.
Mr Sanyal also said that India’s inflation was almost entirely imported and, as an oil importer, something it could have done little to control in the short term. Global oil and other energy costs have increased this year, driven by the effects of the war in Ukraine and wider supply chain issues.
Mr Sanyal said he believed India’s current account deficit was in a comfortable position and asked whether curbs on non-essential imports were being considered, he said: “Govt. will respond flexibly as it develops.”
He also said that India is treating crypto instruments as assets and not as currencies, and their regulation would require global coordination.