RBI’s intervention to save rupee, ready to do more: report
A person familiar with the matter said India’s central bank is intervening in all foreign exchange markets and will continue to do so to protect the rupee, which hit a record low on Monday.
The Reserve Bank of India sees its foreign exchange reserves of around $600 billion as a formidable reserve, which it will use against speculators, said the person, asking not to be identified as the deliberations are not public. The person said that RBI is seeking a systematic depreciation.
A central bank spokesperson was not immediately available for comment.
The rupee on Monday fell 0.8% to an unprecedented level of 77.53, as foreigners continue to pull money from Indian stocks. Rising inflation and the prospect of aggressive monetary tightening are troubling emerging markets, and a surprise rate hike by India’s central bank last week has not been able to stop the currency’s decline.
“The intervention by the RBI today has been small and sporadic,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors. He said the central bank has enough reserves, they can sell another $50 billion, but they may prefer to keep those reserves for bad times.
The person said that the sharp depreciation of the rupee is baseless as India’s exports are strong and the growth rate is on track. This gives the RBI confidence that the levels seen before the latest fall are in line with fundamentals.
The person said that the RBI intervened in the spot, forward and non-deliverable forward markets on Monday. The person said that RBI sees pressure on rupee from weak yuan and strong dollar rather than domestic factors.
India depends on imports to meet about 80% of its oil needs and increased energy prices threaten to accelerate inflation and widen its current account and trade deficit.
“It’s clearly about dollar strength as well as oil acting,” Ashish Vaidya, head of treasury and markets at DBS Bank Ltd in Mumbai, told Bloomberg TV. As far as oil prices go, the rupee will remain under pressure.
The latest figures show that the reserve pile fell below $600 billion for the first time in a year.
– With the assistance of Ronojoy Majumdar.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)