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RBI likely to intervene to arrest rupee fall
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SME Times News Bureau | 22 Dec, 2021
A likely Reserve Bank of India's intervention via a recent US dollar
sale worth around $4 to $5 billion has arrested the sharp slide in rupee
value, cited analysts.
The RBI is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.
However, the decline might trigger again on the back of continuous selling by FIIs in the secondary market.
Lately,
growing cautiousness over a US Fed's tapering measures as well as scare
around the Omicron variant of the Covid-19 impacted investors
sentiments.
Notably, tighter liquidity controls in the US tempts global investors to pull-out money from the emerging markets such as India.
The rupee on Wednesday closed at 75.55 to a greenback.
Last week, the rupee closed at 76.09 to a USD weakening significantly on a weekly basis.
The Indian rupee has stabilised this week after hitting its lowest level of 20 months.
"Recent
correction in rupee seems to have been triggered as an overreaction to
the Omicron variant," said Sajal Gupta, head of forex and rates at
Edelweiss Securities.
"The RBI did intervene in the market when
the rupee hit a year-to-date low of 76.31 last week. However, RBI is not
expected to take further action as the flow picture seems quite
favourable in the medium term."
Recently, the rupee has been
under pressure after the RBI refrained from raising reverse repo rate
and also as the Federal Reserve decided to increase its pace of
tapering.
On the domestic front, FIIs have been net sellers in
the recent past and restricted weakness for the currency suggests that
RBI has actively intervened to curb the volatility.
"The
suspected RBI intervention could be to the tune of $4-5 billion and
market participants expect that the current market swings could still
continue until the fear of the omicron variant does not dim," said
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial
Services.
"Latest data released by the RBI showed reserves
currently stand over $635 billion suggesting that the central bank has
enough cushion to deal with short term volatility."
According to
Dilip Parmar, Research Analyst, HDFC Securities: "Along with growth, the
RBI started looking on liquidity and inflation aspect after FOMC
meeting and from start of the week, they might have heavily intervene by
selling dollar to curb the imported inflation and introducing 'VRRR'
facility to remove extra the liquidity from the system."
"In the
next couple of days, we could see the rupee oscillating in the range
75.10 to 75.70 in the absence of fresh global cues and selling of
foreign institutions could be lower ahead of the Christmas holiday."
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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