Rupee better placed than many other global currencies- Finance minister Nirmala Sitharaman

Rupee better placed than many other global currencies: Finance minister Nirmala Sitharaman

Finance minister Nirmala Sitharaman on Thursday said the rupee’s performance against the greenback is better than that of many other global currencies despite the depreciation in recent months.

The domestic currency breached the psychological barrier of 79 per dollar for the first time on Wednesday, before rising marginally on suspected RBI intervention to close at 78.97.

The rupee has lost 6% so far in 2022 and about 2% in June, as strong dollar, high crude oil prices and sustained capital outflows pressured the domestic currency. However, the Philippine peso has lost over 7% and the South Korean won has shed more than 8% against the dollar in 2022.

Currencies of many countries, especially the emerging markets, have been weakening sharply against the dollar, especially after the US Federal Reserve started raising interest rates to curb runaway inflation. Price pressure across economies has spiked in recent months, more so after the Ukraine war hit the global supply chains and contributed to a surge in oil prices. Consequently, central banks of key economies, including India, were forced to hike policy rates to control inflation, which will weigh down economic growth prospects.

The RBI has been intervening in the market since the outbreak of the Ukraine war in late February to prevent a sharp depreciation of the rupee. Since February 25, the country’s foreign exchange reserves have dropped by almost $41 billion.

Last week, RBI deputy governor Michael Patra said the central bank was not looking at restricting the rupee at a particular level but it had been intervening in the market to curb sharp volatility and prevent “jerky movements” of the currency.