RBI May Intervene More in Currency Markets

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India's central bank may intervene further in the currency markets if it sees a "strong one way risk" for the Indian rupee, Deputy Gov. Subir Gokarn said Friday. "We see the return of some instability in the currency," Mr. Gokarn said in an interview on the sidelines of the Credit Suisse Asian Investor Conference. "We don't target a range (for the rupee), but when there's a risk of moving strongly one way, that's something we want to avoid," he said. Mr. Gokarn's comments come as the rupee is trading at an over two-month low to the dollar. The rupee slipped to a record low against the dollar last year following mounting global uncertainty and slowing growth in Asia's third-largest economy, which has been impacted by an extended period of inflation. The senior Reserve Bank of India official said the nation's currency was relatively stable between January and February. In the last few days, however, he said there has been some instability in the rupee. On Thursday, RBI Adviser Ashima Goyal said the central bank should continue to intervene in the market to ensure that the rupee doesn't weaken significantly beyond its fair value of 50 rupees to the dollar. Currency fluctuations affect software companies to a large extent as they book most of their revenue in dollars, but settle the majority of their costs in rupees. On the inflation front, Mr. Gokarn said he has seen some moderation in inflation, while domestic demand remains strong. However, he warned that the recent sharp rise in oil prices will pose new risks to price pressures. Earlier Friday, Mr. Gokarn said the central bank is moving toward looser monetary policy, though the timing for easing will depend on the state of the economy. At its rate-setting meeting on March 15, the central bank left its key lending rate unchanged, saying risks to inflation have increased due to a recent spurt in crude oil prices, a wide fiscal deficit and a weakening rupee.