MUMBAI (AFP) – India's central bank does not have an exchange rate target, its governor said, suggesting it will not step in to prevent further falls in the weakening rupee.
The rupee hit a historic low of 60.76 against the dollar on June 26 as overseas funds pull out of emerging markets and domestic economic woes mount.
The Reserve Bank of India is believed to have intervened several times in the market in recent weeks, but governor Duvvuri Subbarao said the priority was managing volatility.
"We employ all instruments available to us to manage volatility, and we do try to manage volatility. But we do not have an exchange rate band," Subbarao told media in southern Chennai on Thursday, according to a statement.
The Indian currency, which has fallen more than 10 percent in 2013, is the worst performing currency among major Asian countries.
Analysts believe the central bank lacks the financial firepower needed to manage the rupee and prevent it from falling further.
On Friday, the rupee was quoted at 60.32 to the dollar.
Its tumble raises import prices of everything from oil and fertilisers to food staples such as pulses, stoking already high consumer inflation and causing hardship for India's poor millions.
Business leaders had been hoping that the RBI would cut interest rates when it meets on July 30 in an effort to spur growth, which is at a decade low of 5.0 percent, but the falling rupee makes this more difficult.
The RBI has lowered rates three times this year.