The Reserve Bank of India (RBI) may continue to actively intervene to contain the rupee’s volatility if uncertainty continues over interest rate hikes from the US Federal Reserve or if geopolitical tensions between Russia and Ukraine escalate. Leading brokerage firm Motilal Oswal Financial Services (MOFSL) said on November 7.
On November 2, the US Fed raised the policy rate by 75 basis points to 3.75-4 per cent, while signaling a reduction in the quantum of rate hikes at the next or next meeting. This is the fourth consecutive increase of such magnitude.
The RBI generally intervenes in the market through liquidity management, including selling of the dollar, to prevent a sharp depreciation in the rupee.
“The central bank has pooled these reserves to be used in such situations,” said Gaurang Somaiya, Forex and Bullion Analyst, MoFSL. ,
Read also: RBI may take cues from BoE, US Fed rate hike
Sharing the support and resistance of ion MOSL for Rupee by 2022, he said that USDINR pair is expected to trade with a positive bias and may reach a new high of 85 to 85.50 level and on the downside. , it can be restricted to the level of 80.20. ,
“This year, forex reserves have declined by about $100 billion and yes, there has been some impact of the revaluation as well as the euro and pound have recovered sharply,” he said. Forex reserves stand at $525 billion – the lowest level since July 2020.
In 2022, the rupee has been under a lot of pressure and the year-on-year (YTD) depreciation has been more than 10 per cent mainly due to the bullish outlook of the US Federal Reserve and this has strengthened the dollar. Chief Par, Gaurang Somaiya said.
According to RBI, India’s foreign exchange reserves rose to 531,081 million in the week to October 28 from $524,520 million in the week to October 21, marking a jump of $6,561 million during the period.
Moreover, according to Gaurang Somaiya, both the Federal Reserve and the Bank of England have indicated a slowing rate growth momentum, but will continue to be data-dependent.
“If there is any uncertainty on the geopolitical front again, we will see safe-haven buying for the dollar and this could reduce major crosses including the rupee,” Somaiya said.
With ANI inputs.
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