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RBI says will keep tight leash on currency

The currency market, relatively the most stable in the region, will continue to be closely policed, the Reserve Bank of India said on Tuesday.

"The exchange rate management will continue to focus on managing volatility and ensuring orderly market conditions with no fixed target for the exchange rate," the central bank said its annual report for 2000-01 (July-June).

The central bank has checked sharp movements in the currency by intervening through state-run banks and has in the past said that it will not allow any speculation on the currency.

The Indian rupee, convertible only on the current account, has fallen an average five to six percent annually in the past six years.

It fell 7 per cent in calendar 2000 mainly due to dwindling foreign capital flows and high global oil prices.

But this year it has fallen less than 1 per cent mainly due to significant foreign fund investments -- $2.7 billion so far this year compared to $1.56 billion in whole of 2000 -- and low imports which have fallen because of an economic slowdown.

The central bank said it will continue to build the country's foreign exchange reserves which stood at a record $44.59 billion on August 17 as per the latest data.

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