RBI Governor Malhotra says rupee may be undervalued after recent slide
RBI Governor Sanjay Malhotra says the rupee may now be undervalued in nominal and real terms after its recent depreciation, offering a relaxed assessment as the currency nears 100 per dollar.
Reserve Bank of India Governor Sanjay Malhotra said the rupee may now be undervalued in both nominal and real terms after its recent slide, signaling a shift in the central bank's view as the currency approaches the psychologically important 100-per-dollar level.
Speaking to Mint, Malhotra stated that it would be reasonable to conclude the rupee is no longer overvalued, and that a case could be made for it having moved into undervalued territory. He added that India's balance of payments position is not yet a serious concern, suggesting the central bank sees no immediate need for aggressive intervention. The rupee has weakened sharply in recent months, pressured by a strong US dollar and portfolio outflows from emerging markets.
For forex traders, Malhotra's comments carry significant weight. If the RBI is now comfortable with a weaker rupee, it may reduce the frequency of intervention, allowing the currency to find its own level. This could accelerate the rupee's depreciation toward the 100 mark, a level that has been closely watched by markets. Traders can track real-time rupee movements on NowPrice's live FX dashboard to gauge market reaction. The shift in RBI rhetoric also affects carry trade dynamics, as a more permissive stance on depreciation reduces the appeal of long rupee positions.
Looking ahead, the key question is whether the rupee will breach 100 per dollar and how the RBI will respond. Market participants will focus on upcoming inflation data and the RBI's monetary policy stance. Any signs of further dovishness from the central bank could add to rupee weakness. The balance of payments data and foreign portfolio investment flows will also be critical in determining the currency's trajectory in the coming weeks.