Were closely watching forex market,says RBI

The Reserve Bank of India on Monday said it is closely watching the forex market and will intervene only if there is excess volatility in rupee,even as the domestic currency fell to a nearly four-month low against the US dollar.

The RBI doesnt look for a fixed level of rupee. We will only intervene if there is excess volatility, RBI Deputy Governor Anand Sinha told reporters on the sidelines of an event here. The central bank was closely monitoring the situation,he said. The rupee today dropped by 19 paise to close at nearly four-month low of 52.73/74 against the US currency on continued capital outflows and month-end dollar demand from importers.

Depreciation of rupee is beneficial for exporters as they get more value for every dollar but at the same time,it increases the cost of imports. A firm dollar overseas also weighed on the rupee while a rally in local stocks capped the drop to some extent,a forex dealer said. FIIs pulled out a total of $377.36 million in first five days of the last week.

The rupee would have fallen below 53 had the Sensex not recovered by 131 points today, said a dealer.