Skip to main content

RBI rushes in to prop up falling rupee

By
RBI rushes in to prop up falling rupee
India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices.
Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg.
On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank intervention after a long gap,” said Anindya Banerjee, currency analyst at Kotak Securities. “Without such a move, the rupee would have breached higher levels as the worrying factors are showing no signs of fading.
Through the trading day in Mumbai, the rupee fell as much as half a percent to 67.18 a dollar. Toward the end of the session, the central bank intervention helped it recoup some of its losses, and the unit closed at 67.14, down 0.40 per cent. The Bloomberg spot dollar index, which measures the unit against 10 currencies, rose about half a percent to trade at 92.92 late Monday India time.
“The rupee’s loss is a part of the larger dollar move,” said Ashish Vaidya, head of trading at DBS Bank India. “We are seeing similar weaknesses in other emerging market currencies. Higher oil prices continue to worry (us). Countries dependent on oil imports will be hit further as rising crude (prices) continue to put pressure on India’s fiscal and current account deficits.”

Global crude oil prices are causing concern for importers such as India, which meets about four-fifths of its transportation energy needs from overseas shipments. The West Texas Intermediate crude is trading at around Rs 70 and Brent held near Rs75, with most experts predicting the benchmarks would keep rising in the near-term on mounting geopolitical risks.
India’s current account ended in a deficit of Rs13.5 billion, or 2 per cent of GDP, in the quarter ended December 2017, up from Rs 8.0 billion, or 1.4 per cent of GDP, in the quarter ended December 2016, according to the preliminary data released by the RBI. The CAD was at 1.1 per cent of the GDP in the September quarter.
CAD, which is the excess of imports of goods and services over exports, has accelerated due to rising oil prices and electronics shipments from overseas. On Monday, stateowned oil importing companies were seen buying the dollar. A large construction conglomerate, too, was enhancing its dollar reserves. “Some oil and infrastructure companies rushed to buy dollars as they fear a further dip in the rupee’s value,” said KN Dey, founder, United Financial Consultant, a forex advisory firm.
The  Economic Times, New Delhi, 08th May 2018

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more