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RBI governor seeks to soothe investor's nerves as rupee slide continues

By Religare

Rajan seeks to soothe investor's nerves as rupee slides
The Reserve Bank of India (RBI) governor Raghuram Rajan on Wednesday opted to stem rupee's slide by addressing the concerns of investors which have been driving the currency lower in past few days.

Rajan said that while the fears of a sooner-than-anticipated Fed tapering have affected financial markets across world, the Indian markets have added volatility due to concerns over policy rates and about oil marketing company demand for dollars.

The RBI governor said his media address was aimed at clarifying its interpretation of economic events and the likely direction of policies at times of uncertainty so that the market worries about the right things and does not get into a tizzy about the wrong ones.

"There is no fundamental reason for volatility in the value of the rupee. At some time, it makes sense to take a deep breath and examine the fundamentals," Rajan said.

The statement of Rajan came on backdrop of continous slide seen in rupee against the US dollar. Before rising on Wednesday after governor's speech, the rupee has posted decline for five consecutive sessions.

Talking about the concerns over OMCs' dollar demand returning to the market, which has been the major factor behind rupee's slide in past few days, the governor said that the markets have absorbed the additional demand quiet smoothly and it would have absorbed the remaining demand too easily, had the finance ministry not commented about it in media last week.

"There has been some turmoil in currency markets in the last few days but I have no doubt that once markets calm down, the remaining demand will be absorbed easily. We have no intention of rushing this process," Rajan said.

Dion Global Solutions Ltd.

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