RBI moderating extreme currency volatility with interventions: Rajan

Mumbai, May 26: Reserve Bank of India Governor Raghuram Rajan on Thursday said the central bank had been moderating extreme currency volatility through interventions. “The RBI has been moderating periods of extreme volatility in currency through exchange intervention — though only when the movement is excessive — and increasing access to foreign exchange reserves, including pooling of reserves,” Rajan said while iugurating a meeting of SAARCFINCE.

SAARCFINCE is a network of central bank governors and fince secretaries of the eight-tion South Asian Association for Regiol Cooperation (SAARC).

Terming a sharp slowdown in Chi a “significant risk” for global economy, particularly the SAARC region, Rajan said India had devised a four-pronged defence against exterl shocks that consist of “good policies, prudent capital flow magement and swap arrangements, preventing extreme forex volatility, and building reasoble forex reserves”.

“Good policy has been essential to our stability,” he added. The RBI Governor said India’s swap arrangement with a number of SAARC countries had been drawn on by some to alleviate short-term foreign exchange needs and expressed the hope that these proved helpful.

“The sharp contraction in Chi’s imports over the past year, for instance, had already led to spillovers through the trade, confidence, tourism and remittance channels and SAARC tions had not been able to avert its impact.

“More negative exterlities could follow as the Chinese economy adjusts to a more sustaible path,” he said. (IANS)