Rupee Close To 72-level, Time Ripe For Policy Intervention: Yes Bank

The rupee is close to its intrinsic value of around 72 per US dollar and the time is ripe for policy intervention to check further depreciation of the Indian currency, according to Yes Bank. "Time is right for policy intervention to anchor the sentiment and check rupee depreciation. Currently, the rupee is tracking closer to its intrinsic value," Yes Bank group president & chief economist Shubhada Rao said Saturday.

Speaking at the Merchants' Chamber of Commerce &Industry's India Economic Forum 2018, Rao said that according to the bank's view, intrinsic value of the rupee is around 72against a US dollar taken on a base of 2011-12. International Monetary Fund (IMF) India resident representative Andreas W Bauer also said according to their latest report, the rupee was around its Real Effective Exchange Rate (REER).

Rao said any further slide from the current levels was unlikely but it is difficult to predict exact numbers due to sentiments, global geopolitical and economic reasons. She said fundamentally the current crisis is notsimilar to the 2013 situation. "During 2013, inflation was around 11 per cent, while now the inflation has been eased to about five per cent among other factors," she said. Rao, however, favours the need for policy intervention by way of controlling consumption-related imports like gold. On Wednesday, noted economist Ashok V Desai said the falling rupee is a "very strange situation" as the country is sitting on USD 400 billion of reserves. "If the RBI wanted, it could stabilise the exchange rate at any point, even at Rs 40 or Rs 50, but RBI decided not to do it for some reason... There is absolutely no connection between what the Centre and the RBI are seeking. Why don't they talk to each other, and work out some rational policy," Desai told reporters at a Bengal Chamber of Commerce event.

In mid-August, city-based economist Abhirup Sarkar had called for policy intervention and suggested imposition of' restrictions' to stem the sharp slide of the rupee. Yes Bank has noted that overvaluation over fair value to have reduced to 3.7 per cent in August this year from 9.9per cent in August 2017. The bank has also predicted FY'19 to post the first Balance of Payments (BoP) defict since FY12'. 

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