RBI ‘correct’ to use FX reserves to tackle rupee volatility

MUMBAI, July 25 (Reuters): The Indian rupee strengthened to its highest level in more than a week on Monday afternoon tracking broad losses in the dollar, but weaker local shares and losses in other Asian peers ahead of the US Federal Reserve meeting's outcome later this week limited gains.
The partially convertible rupee was trading at 79.70/71 per dollar, its strongest since July 14 and higher compared to its close of 79.8550 on Friday.
Meanwhile, the Reserve Bank of India (RBI) is justified in using the country's foreign exchange reserves to smooth out volatility in the rupee's moves against the dollar, a member of the Economic Advisory Council said on Monday.
"I think that the RBI is correct to use the FX reserves to smooth movement in the INR/USD... There is no point targeting a INR/USD level when USD is appreciating against all other majors," Sanjeev Sanyal told the Reuters Global Markets Forum (GMF) in an interview.
"Longer term, we need to maintain overall macro-stability and allow the cycle to play itself out," said Sanyal, who was previously India's chief economic adviser.