The Reserve Bank of India (RBI) is intervening in the market to defend the rupee and will not allow its ‘jerky movements’ but the central bank is not targeting any specific level for the domestic currency against the US dollar, its deputy governor Michael Patra said.

Patra, who heads RBI’s monetary policy department, noted that the level of depreciation of the Indian currency is one of the lowest in the world in recent times. He attributed this to the RBI holding foreign exchange reserves of around USD 600 billion.

“We will stand for its stability, and we are doing. We are there in the market. We will not allow disorderly movements of the rupee. We have no level in our mind, but we will not allow jerky movements. That is for certain and let it be widely known that we are in the market defending the rupee against volatility,” Patra said at an event organised by the PHD Chamber of Commerce and Industry.

The rupee has been on a slippery slope after the US Federal Reserve kicked off aggressive rate hikes. On 23 June, the rupee closed at its all-time low of 78.32 against the US dollar, and is down more than 5% in 2022. 

The rupee has been impacted by the flight of foreign portfolio investors, rising crude oil prices and a strong dollar. As per a report by Bank of America Securities, the rupee is expected to slide to 81 to the dollar by year-end.

Patra expects the RBI to be able to bring inflation back to target within a two-year span. The RBI has the inflation target at 4%, with a 2% movement on either side.

“There are indications that inflation may be peaking. As monetary policy works through into the economy and inflation falls back into the tolerance band by the fourth quarter of 2022-23, it will be the playing-out of the baseline scenario," he said.