In its a macroeconomic report, Reserve Bank of India (RBI) said the priority for monetary policy now is to restore stability in the currency market so that macro-financial conditions remain supportive of growth.
RBI said global currency market movements in June-July 2013 prompted a re-calibration of monetary policy.
The report, which was released a day before the first quarter monetary policy review of RBI, shows the central bank would try to manage liquidity actively to reinforce monetary transmission that is consistent with the growth-inflation balance and macro-financial stability.
In order to deter capital outflows, the RBI squeezed liquidity from the money market and pushed up short-term interest rates.
Owing to a possible change in the stance of US Federal Reserve, foreign investors are withdrawing their investment in India prompting rupee to depreciate against dollar.
The Indian currency hit a record low of 61.21 to the dollar on July 8, when it was down more than 9 percent since the start of the year.
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