Mumbai, Feb 7 (PTI) Reserve Bank Governor Sanjay Malhotra on Friday said the exchange rate policy has remained consistent over the years and the central bank does not target any 'specific level or band' of the rupee, which slipped to an all-time low of 87.59 to a US dollar.

On Thursday, the rupee plunged 16 paise to close at a record low of 87.59 against the American currency.

"I would like to mention here that the Reserve Bank’s exchange rate policy has remained consistent over the years. Our stated objective is to maintain orderliness and stability, without compromising market efficiency," he said while unveiling the outcome of the Monetary Policy Committee meeting.

Accordingly, he said, "our interventions in the forex market focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band. The exchange rate of the Indian rupee is determined by market forces." The rupee has declined about 2 per cent so far this year. It depreciated by 3.2 per cent against the dollar since November 6, 2024, the day US presidential election results were announced, largely mirroring the 2.4 per cent appreciation in the dollar index during the same period.

The forex reserve has seen a decline of USD 45 billion in the last 3 months partly due to RBI's intervention in the forex market. The forex kitty stood at USD 675.65 billion as on November 8, 2024.

As on January 31 this year, India’s foreign exchange reserves stood at USD 630.6 billion, up from USD 629.55 billion in the preceding week, providing an import cover of over 10 months.

With receding expectations on the size and pace of rate cuts in the US, the US dollar has strengthened and bond yields have hardened, he said, adding, Emerging Market Economies (EMEs) have witnessed large capital outflows, leading to sharp depreciation of their currencies and tightening of financial conditions. PTI DP CS DP ANU ANU

Exchange rate policy affirms interventions to smooth volatility, not to target specific rupee levels, preserving market determination. Exchange rate management emphasises maintaining orderliness and stability without targeting a specific exchange rate level or band; interventions are used to smooth excessive or disruptive volatility rather than to defend a predetermined rate. That stance is placed in the context of external pressures-stronger foreign currency, rising yields, and capital outflows-that have contributed to currency depreciation and reserve adjustments, with interventions forming part of reserve management and monetary policy responses.