The Indian government has said that the authorities will only look to intervene in the foreign exchange market when there is volatility in the sector.

The Mid-Year Analysis 2011-12, which is presented to the parliament said about the currency valuations that the various currencies around the world show some tendency to 'overshoot' periodically.

It said that the fall in the value of rupee is due to global economic uncertainty and the flight of capital to the relative safety of the US treasury. “However, given that inflation has been high in India compared to the US, it is only to be expected that there will be some depreciation in the rupee vis-a-vis the US dollar," it read.

There are concerns in the country that the continuing depreciating value of the rupee would cause loss of confidence and indicate widening of current account deficit besides putting pressure on inflation.

India’s central bank, the Reserve Bank of India had intervened in foreign exchange market for the first time ever in September 2011 by selling USD 845 million to control the excess volatility in the value of the rupee.

The monthly average value of rupee has fallen 5.6 per cent from Rs 44.97 per US dollar in March 2011 to Rs 47.63 per US dollar in September 2011.