The Reserve Bank of India (RBI) is not aiming for any specific price band for the Indian rupee but is instead focused on curbing excessive volatility in the currency market, RBI Governor Sanjay Malhotra said on Saturday.
His remarks came a day after the central bank cut its key interest rate for the first time in nearly five years, signaling a shift in monetary policy. The decision was aimed at supporting economic growth while ensuring financial stability.
Rupee Strengthens Following Rate Cut
The Indian rupee saw modest gains in early trading on Friday, reflecting the positive movement of most Asian currencies. As of 9:20 a.m. IST, the rupee stood at 87.46 against the US dollar (Dh23.83), strengthening 0.1% from the previous session.
Meanwhile, dollar-rupee forward premiums saw a dip, indicating shifts in market sentiment following the RBI’s policy decision.
Liquidity Management a Key Priority
Malhotra emphasized the central bank’s commitment to ensuring adequate liquidity in the banking system.
“We will be very, very watchful, alert, and nimble in responding to the banking system’s liquidity needs, whether transient, overnight, or more durable liquidity,” he stated.
The RBI’s approach suggests that it will take a flexible stance in managing liquidity to support lending and economic activity, while also preventing sharp fluctuations in the rupee’s value.
Market Outlook
The RBI’s policy shift and its focus on stabilizing volatility rather than defending a specific exchange rate are expected to guide the currency market in the coming weeks. Investors and traders will be closely watching for further central bank interventions and policy adjustments as global economic conditions evolve.
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