Business · Markets · 8 hrs ago
RBI measures may only briefly ease pressure on the rupee
India’s rupee has fallen close to a record low, and economists say pressure on it may continue.
The Reserve Bank of India announced emergency measures over the weekend to support the currency.
These include tighter limits on some foreign-exchange transactions and a cash reserve requirement for certain large derivative contracts.
The RBI also set up a special window to meet the daily dollar needs of three state-owned oil retailers.
The measures may discourage speculation and give the rupee temporary relief, but economists say they do not change the global forces behind its decline.
Those forces include a stronger US dollar, high global interest rates, costly commodities and foreign investors withdrawing money from Indian shares.
Economists expect pressure to persist, and the sources do not describe any further steps planned by the RBI.
The Reserve Bank of India announced emergency measures to support the rupee, but analysts said they may provide only temporary relief.
The measures include limits on some derivative deals, restrictions on rebooking cancelled contracts and a 20% cash reserve requirement for certain contracts.
The rupee was at 96.73 to the dollar before the measures, while the offshore rupee later strengthened to 96.53/54 in the forwards market.
Analysts said global factors, including high US bond yields, a strong dollar and volatile capital flows, continue to weigh on the currency.
India’s foreign exchange reserves fell by nearly $52 billion in a month, with most of the decline used to defend the rupee, according to the article.
- Who
- The Reserve Bank of India announced the measures. Economists and market analysts assessed their likely effect.
- What
- The RBI introduced emergency steps to support the rupee. Analysts said the relief may be temporary.
- When
- Saturday, according to the article.
- Where
- India.
- Why
- To support the rupee amid pressure from global factors, including a strong dollar, high global interest rates and capital outflows.
This story does not have two clearly opposing sides.
There can be a natural tendency for the rupee to decline by 3-4% in the long term
The recent measures by the RBI will discourage speculation and provide some respite to rupee. However, it won’t change the global backdrop
We have seen such drastic measures by the RBI in the past. However, the worst seems not over yet. Donald Trump’s action on Iran is still awaited
The rupee lost nearly 10% during the financial year.
The RBI announced emergency measures to support the rupee.
The offshore rupee was seen stronger at 96.53/54 to the dollar in the forwards market after news of a US deal with Russia.
- Rupee before measures
- 96.73 to the dollar
- Offshore rupee
- 96.53/54 to the dollar in the forwards market
- Forex reserves used
- Nearly $52 billion in a month
- Equity outflows
- $32.4 billion from Indian equities so far in the calendar year
- Cash reserve requirement
- 20% on forex derivative contracts above $2 million
Sources
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