The Reserve Bank of India (RBI) has denominated the euro as the second intervention currency, after the US dollar. In a release, the RBI said the central bank in future would buy and sell euros in the domestic market as and when required.
The RBI move follows a central government notification dated February 27 to the RBI providing the latter with the flexibility to use the euro as an additional currency for operation. Forex dealers said adoption of the euro as a second intervention currency would have the same impact as in the case of the dollar. If the RBI intervenes in the forex market by buying euros, the rupee will depreciate not only against this currency, but also against the dollar.
Said Parthasarathi Mukherjee, treasurer, UTI Bank:
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