Business · Markets · 1 day ago
India acts to support rupee as it nears record low against dollar
India’s central bank is taking new steps to support the rupee, which has fallen close to its record low against the US dollar.
It will provide dollars from its reserves to Indian Oil, Hindustan Petroleum and Bharat Petroleum starting next Monday.
The move is intended to ease pressure on the foreign-exchange market by meeting the oil companies’ daily need for dollars.
The bank is also restricting currency-derivatives trading linked to the rupee, including lowering a trading limit from $100 million to $5 million.
Dealers must also set aside an amount equal to 20% of the nominal value of each rupee-linked derivatives contract to cover foreign-exchange risk.
The rupee closed at 96.73 per dollar on Friday, near its record low of 96.96, reached in May.
The new measures come despite the central bank’s earlier steps to supply dollars and raise its key interest rate, as pressure on the currency continued.
The Reserve Bank of India announced additional measures to support the rupee as it neared its record low against the US dollar.
The bank will provide dollars directly from its foreign exchange reserves to three state-owned oil marketing companies.
It also tightened rules on rupee-linked currency derivatives, including lowering the maximum exchange-traded position limit to $5 million from $100 million.
The rupee closed at 96.73 per dollar on Friday, near its record low of 96.96, recorded in May.
- Who
- The Reserve Bank of India and three state-owned oil marketing companies: Indian Oil, Hindustan Petroleum and Bharat Petroleum.
- What
- The central bank announced measures to support the rupee, including direct dollar access for the oil companies and tighter derivatives rules.
- When
- The measures were announced on Saturday; the oil companies were due to access the dollar window from the following Monday.
- Where
- India’s foreign exchange market.
- Why
- The rupee had fallen close to its all-time low against the US dollar, putting pressure on the currency.
This story does not have two clearly opposing sides.
The Reserve Bank of India announced on Saturday that it is taking additional measures to support the rupee, after the currency fell to levels close to its all-time low against the US dollar.
The rupee recorded its all-time low of 96.96 per dollar.
The rupee closed at 96.73 per dollar, near its record low.
The Reserve Bank of India announced additional measures to support the rupee.
The three state-owned oil marketing companies were due to gain access to dollars through the special window.
- Friday close
- 96.73 rupees per US dollar
- Record low
- 96.96 rupees per US dollar, recorded in May
- Oil companies
- Indian Oil, Hindustan Petroleum and Bharat Petroleum
- New derivatives position limit
- $5 million, down from $100 million
- Risk reserve requirement
- 20% of the nominal value of each rupee-linked derivatives transaction
Sources
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