India RBI chief says markets can be irrational as rupee returns near record lows - Reuters

The Reserve Bank of India is signalling that it will not be pushed into defending the rupee at any particular level, even as the currency trades close to its record low. The central bank chief's remark that markets "can be irrational" is a reminder that exchange rates often overshoot on sentiment, positioning and flows rather than on fundamentals alone. For observers, the comment suggests tolerance for gradual depreciation rather than a hard defence of a specific line in the sand.

The rupee's slide matters beyond currency desks. A weaker rupee raises the cost of imported goods, which can feed into inflation, and it affects the returns foreign investors earn on Indian assets. It can also influence how the central bank weighs interest rate decisions, since currency weakness and price pressures sometimes pull policy in the same direction.

What to watch next: the RBI's intervention signals in spot and forward markets, the pace of foreign portfolio flows, and whether the currency's moves stay orderly. The key question is whether this is a controlled adjustment or the start of broader volatility.