Infosys Technologies Ltd., India’s second-largest software exporter, said the central bank must intervene to reduce the volatility of the rupee, Asia’s best performing currency in the past month, to assist exporters.
“We’ve seen the rupee go from 52 to 39 and back and forth,” Chief Financial Officer V. Balakrishnan said today in Bangalore, where the company is based. “It will kill the whole export industry. The RBI has no choice but to intervene at some point in time, like every other country.”
Central bank Governor Duvvuri Subbarao said today that the Reserve Bank of India may intervene if inflows are lumpy and volatile and disrupt the economy. India is among the latest to signal it will stem currency gains after central banks from Brazil to Israel and Thailand intervened in foreign-exchange markets.
Infosys, which draws the majority of its revenue in dollars and euros from clients based in the U.S. and Europe, suffers a 40 basis points drop in operating margin for every one percent movement in the rupee against the dollar, the company said.
The local currency has gained 5.3 percent in the past 30 days as global investors have poured a record $23 billion into local shares and $10 billion in rupee debt this year to profit from an economy growing at an annual pace exceeding 8 percent.
“I think exporters have to get used to the volatile currency environment,” Balakrishnan said. “At the same time, the RBI has to step in at some point because this kind of volatility is unsustainable. I am not the RBI governor, but if I was, I’d do it now.”
The rupee gained 0.1 percent to 44.08 against the dollar at 3:49 p.m. in Mumbai today.
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