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| Re is more stable than others: RBI |
| BS Reporter / Mumbai Oct 08, 2009, 00:34 IST |
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Central bank concerned with volatility, and not direction.
 The Reserve Bank of India (RBI) on Wednesday said that the rupee was much more stable compared to other international currencies and it (RBI) was happy with its movement even as the currency advanced to a one-year high.
There has been sharp a upward movement in the value of rupee against the dollar this week. The rupee rose 0.5 per cent to 46.68 a dollar, according to data compiled by Bloomberg. It had closed at 46.89 yesterday.
“The central bank is not much concerned with the day-to-day changes in the value of the rupee. On the long term basis, we are happy the way it is moving,” KC Chakroborty, deputy governor of RBI, told reporters on the sidelines of seminar on the small and medium enterprises.
Asked about the approach of the central bank on the currency’s movement, he said RBI tried to check long-term volatility, but it all depended on market players. “You see the way the yen and the euro are moving, compared to them the rupee is much more stable.”
The currency strengthened 4.4 per cent this year as overseas investors bought $12.4 billion more of Indian shares than they sold through October 5, while the Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 74 per cent in the period.
Dealers said the advance in rupee was partly driven by speculation that central bank would increase interest rates to temper inflation, boosting the appeal of the nation’s high-yielding assets.
RBI Governor D Subbarao in his speech at the IMF-World Bank annual meeting in Istambul said RBI might need to tighten monetary policy after wholesale prices rose to their highest since the end of May.
State Bank of India official said the value of rupee (appreciation) was also a reflection of the weak dollar, rising remittances from overseas Indians and foreign direct investment.
The flow of foreign currencies is increasing rupee resources in the system. This would improve liquidity, SBI official added.
HDFC Bank Chief Economist Abheek Barua said the sharp move in the rupee over the last two trading sessions did take us by surprise. It is not difficult to explain in retrospect given the environment of the dollar-bearishness that has prevailed across markets.
The offer on the dollar was exacerbated yesterday by rumours that the Gulf countries were considering an alternative to the greenback for billing oil and pegging their currencies, a fear that has periodically stalked the US currency.
The most actively traded currency future contract was USD-INR OCT 28 2009. The last traded price for this contract was Rs 46.73 on the MCX platform for currency futures.
The one-month rupee contract in the NDF market is currently being traded at Rs 46.60/46.69.
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