Union Finance Minister Nirmala Sitharaman said that the Indian rupee has withstood the sharp strengthening of the U.S. dollar and performed much better than many other emerging market currencies.
The Reserve Bank of India was working to contain the rupee's volatility, Sitharaman says at a media briefing in Washington D.C., adding that the "rupee will find its own level."
These comments come days after the local currency plunged to a record low of 82.69 against the US dollar last week as fears of aggressive rate hikes by the US Federal Reserve spooked investors.
Responding to a question from news agency ANI, Sitharaman says, "Dollar is strengthening incessantly. So obviously, all other currencies are performing against the strengthening dollar. I am not talking about technicalities but it is a matter of fact India's rupee probably has withstood this dollar rate going up."
"The fundamentals of the Indian economy are good, macroeconomic fundamentals are good. The foreign exchange reserve is good. This is what I keep repeating that inflation is also at a manageable level," she adds.
Sitharaman, who held 24 bilateral and about a dozen multilateral meetings on the sidelines of the IMF and the World Bank meetings, says that she would love to bring the inflation further below 6%, and the government is making efforts for it.
While announcing the monetary policy committee's repo rate hike last month, Reserve Bank of India (RBI) governor Shaktikanta Das had said that the central bank doesn't have any fixed exchange rate amid the depreciating rupee against the US dollar, and its market intervention is to curb excessive volatility.
"The rupee is a freely floating currency and its exchange rate is market-determined. Second, the RBI does not have any fixed exchange rate in mind. It intervenes in the market to curb excessive volatility and anchor expectations," Das said, adding that the rupee has fared much better than several reserve currencies as well as many of its emerging market economies and Asian peers.
The recent depreciation of the rupee vis-à-vis the US dollar contributed to higher inflation in India, according to the World Bank, which has downgraded India's gross domestic product (GDP) growth projection to 6.5% for the financial year 2022-23.
Elevated imported inflation pressures remain an upside risk for the future trajectory of inflation, amplified by the continuing appreciation of the US dollar, which has strengthened to a 20-year high, the Reserve Bank of India's monetary policy committee pointed out in its outlook.
The RBI last week issued guidelines for banks to manage their foreign currency exposure and avoid significant losses during the period of heightened volatility in foreign exchange rates. The banking regulator directed banks to assess the unhedged foreign currency exposures of all counterparties to whom they have an exposure in any currency.