Stable currency fosters internationalisation, says Zarin Daruwala

The rupee was the third most stable Asian currency against the US dollar in the financial year 2023-2024 after the Hong Kong dollar and Singapore dollar, primarily due to timely intervention by RBI

A stable exchange rate fosters internationalisation by promoting cross-border flows, said Standard Chartered Bank’s Chief Executive Officer for India and South Asia, Zarin Daruwala, on Friday.

“You need a very stable currency to promote cross-border flows, and we have seen that the rupee has been relatively stable in the past few years. And a relatively stable exchange rate enables internationalisation,” she said at the Global Fintech Fest in Mumbai.

Another key factor for the internationalisation of rupee is the presence of deep financial markets, which support a currency by enabling efficient hedging and investment. India’s government securities market is both large and liquid, providing the necessary infrastructure for this process, Daruwala added. 

Additionally, she highlighted that it was crucial to establish offshore rupee pools, which are essential for creating bilateral swap lines and facilitating international currency arrangements. The inclusion of Indian bonds in the JPMorgan Bond Index has fulfilled the need to provide investment avenues for other economies holding INR, ensuring they have opportunities to utilise and grow their holdings.

Rupee was the third most stable Asian currency against the US dollar in financial year 2024, after Hong Kong dollar and Singapore dollar, primarily due to timely intervention by the Reserve Bank of India. The rupee depreciated by 1.5 per cent over the year, against 7.8 per cent in FY23.

Additionally, in the calendar year 2023, the local currency remained stable against the greenback, marking the least volatility it witnessed in nearly three decades. Rupee saw a marginal depreciation of 0.5 per cent against the dollar, first time since 1994, when it appreciated by 0.4 per cent.