The Reserve Bank of India (RBI) on Friday made it clear that the central banks intervention in the forex market would be limited to curbing volatility in the rupee,but as of now,the situation does not call for any action. Even as RBI Deputy Governor Subir Gokarn ruled out any intervention from a rate-targeting viewpoint and commerce secretary Rahul Khullar warned exporters not to get too greedy,the rupee came down perilously close to the psychological 50-level mark at 49.90 during intra-day as the lingering euro zone crisis pushed up demand for dollar. The domestic currency,however,bounced back to end the day 14 paise up at 49.43/44,which the treasury managers and forex dealers attributed to the Reserve Bank intervention twice during the day. The RBI intervened in the market twice in the day at 49.85 in the morning trade and brought it down to 49.10 and also later at 49.50. Had it not been RBIs role,the rupee would have breached the 50-mark today, said a dealer. The RBIs stated position is that it intervenes only to stem excessive volatility. But in recent years,it has largely let the rupee free unlike its Asian peers,presumably to keep the $300 billion-plus forex reserves intact. The RBI intervenes by buying or selling the dollar to influence exchange rate and stabilise the currency. In an interview to a private television channel in New York,Gokarn said,We,at this point,do not see any intervention from a rate targeting view point. That is something that would reflect a change in policy stance,which we are not doing at this point. If we do intervene at all,it would be with a very narrow perspective or narrow objective of smoothing of what might be a very volatile market situation,but nothing beyond that, Gokarn said. On Thursday,the rupee had plunged by 124 paise to close at 49.57/58 per US dollar,setting off alarm bells in policymaking circles,as the weak domestic currency will make imports costlier and fuel inflation. A weak rupee will also hit corporates which have taken dollar loans. The 10 per cent decline in the rupee exchange rate in the last three months has given merchandise and software exporters cause for cheer,as they will enjoy better realisation in rupee terms from their wares. Cautioning the exporters community,Khullar advised them not to repeat the mistakes in 2007-08. Hedge your (exporters) risks,do not get too greedy and for Christs sake this time be more careful. Do not go to bank and buy derivatives about which you have no idea, he said. Meanwhile,the Prime Ministers Economic Advisory Council (PMEAC) chairman C Rangarajan said that decline in rupee was on expected lines amid fall in currencies of several other emerging economies. Rupee had stayed very strong for quite a number of years and therefore some decline in its value was expected,Rangarajan said in Chennai.
