RBI ready to spend up to $100 billion more to protect rupee: report
The RBI's currency reserves have decreased by more than $60 billion from their peak of $642.450 billion
The rupee plummeted to the low of 80 per US dollar on Tuesday
The rupee depreciated 4 paise to 79.96 against the US dollar on Wednesday
The Reserve Bank of India is ready to sell a sixth of its foreign exchange reserves to safeguard the rupee from further depreciation after it hit historic lows in recent weeks, reported Reuters citing sources.
The rupee has lost more than 7% of its value in 2022 and plummeted to the crucial level of 80 per US dollar on Tuesday, according to Reuters, but the drop would have been significantly more if the Reserve Bank of India (RBI) had not intervened to stop the slide.
The RBI's currency reserves have decreased by more than $60 billion from its peak of $642.450 billion in early September, owing to value fluctuations but mostly to dollar selling intervention.
Despite the reduction, the RBI's reserves of $580 billion remain the world's fifth biggest, providing the central bank confidence in its capacity to prevent a quick, abrupt depreciation of the currency.
"They have shown that they will use reserves at will to prevent volatility in the rupee. They have the wherewithal and have demonstrated the willingness to use it and RBI can afford to spend even $100 billion more if required to defend the rupee," according to Reuters.
The RBI, as per its stated stance, according to Reuters, does not try to protect the rupee or hold it at a certain level but will act to avoid any runaway depreciation in the currency.
The rupee depreciated 4 paise to 79.96 against the US dollar in opening trade on Wednesday amid demand for dollar from oil importers and to firm crude oil prices.
Meanwhile, within less than three weeks of its implementation, the government reduced windfall taxes on other fuels and removed a tax on petrol exports.
According to a government statement, the Centre has lowered the windfall tax on diesel and aviation fuel shipments by Rs 2 per litre and totally eliminated the Rs 6 per litre duty on petrol exports. It also reduced the tariff on domestically produced crude by around 27% to Rs 17,000 per tonne.