RBI today said it will pull all stops to defend the rupee if warranted and its selective intervention in recent days should not be "misconstrued" as its "inability" to deal with the challenge.
"We do have the instruments and capacity to enhance the supply of foreign exchange into the market and will use them, as appropriate," RBI Deputy Governor Subir Gokarn told a CII event here through a video recording.
Noting that the pressure on the rupee is likely to persist for some more time owing to the ongoing global turbulence, he said, "we will not hesitate to use all the available instruments" if the central bank sees the short-term risk of accelerated downward spirals.
However, Gokarn defended the Reserve Bank stance of selective intervention, even when the rupee fell for nine continuous days last month to hit its lowest on November 23 at 52.73 a dollar.
"While the recent sharp depreciation of the rupee has, in certain quarters, led to an assessment of helplessness (of RBI) in dealing with the kind of global turbulence we are witnessing today, our strategic behaviour should not be misconstrued as our inability to deal with it."
Stating that the RBI approach on checking volatility does not include a "strong intervention" to achieve a specific target, the Deputy Governor, who overseas the monetary policy at the central bank, clarified.
The Indian unit has been steadily weakening over the past few months, becoming the worst performing currency in the Asian region, losing nearly 18% between August and November. However, in December the rupee snatched back its value by over 3%.
