Rupee Nears Record Low as RBI Hike Leaves Traders Wanting More
India’s rupee retreated even after the central bank hiked interest rates for the first time in four years, as the lack of more aggressive steps to tighten liquidity and support the currency left traders disappointed.
Mumbai: RBI Governor Sanjay Malhotra expressed confidence on Wednesday that the Indian rupee may be undervalued according to various estimates, and the central bank will take steps to stabilize the currency and help it reach its rightful value. During a press briefing following the local currency nearing its record low against the US dollar, Malhotra clarified that while markets may appear irrational in the short term, they accurately reflect the currency's true value over the long run.
He assured that the RBI will support an orderly movement of the rupee and ensure no excessive volatility occurs. The comments came as the rupee has been facing pressure throughout the year, particularly since the start of the West Asia conflict in late February, which led to crude oil prices surging and posing a direct challenge for India as an oil-importing nation.
To counter the currency's decline, the RBI introduced a concessional swap facility for diaspora deposits and bond issuances. Banks have utilized nearly USD 133 billion under the FCNR(B) deposits facility, temporarily alleviating pressure on the currency. However, the rupee has since depreciated in recent sessions. Malhotra's remarks echo those of Deputy Governor Poonam Gupta on September 24, who suggested there is a case for the rupee to stabilize and appreciate from its current levels.
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