The story of the Indian Rupee (INR) has been one of India’s resilience and stability, according to Reserve Bank of India Governor Shaktikanta Das.
“In this complex world with both push and pull factors at play, the INR — which is market-determined — should be allowed to find its level, and that is what we have been striving to ensure. We must deal with the current global hurricane with confidence and endurance,” said Das.
The Governor noted that the appreciation of the US dollar this year, which precipitated large-scale depreciation of all major global currencies, including the INR, has drawn wide attention.
Das emphasised that “its important to make an objective assessment of the movement of the INR in the context of global and domestic macroeconomic and financial market developments.
“Through this episode of US dollar appreciation, the INR’s movements have been the least disruptive, relative to peers.”
In fact, the INR has appreciated against all other major currencies except a few (Swiss franc, Canadian dollar, Singapore dollar, Russian rouble).
The Governor observed that cross-country comparisons of exchange rate movements are often made on an inflation-adjusted basis or what is called in real effective terms.
On a financial year basis (that is from April 2022 to October 2022), the INR has appreciated by 3.2 per cent in real terms (based on BIS real effective exchange rates), even as several major currencies have depreciated, he said.
Das remarked that the terminal interest rate for the US Fed is anybody’s guess, but it cannot be the case that their monetary policy will be tightened endlessly.
“When the tightening is over, the tide will surely turn. Capital flows to India will improve and external financing conditions will ease,” he said.