Skip to main content

RBI Changes its Stance on Rupee Swings

By
The central bank has conspicuously taken a ‘hands-off’ approach on days the rupee fell
The Reserve Bank of India (RBI) appears to have changed its approach toward dealing with volatility in the currency markets. While the central bank’s stated position has been that it would step in to curb volatility, the RBI was conspicuous by its ‘handsoff’ approach on days the rupee fell precipitously. On the day the rupee plunged to a new record low in five years, the RBI only sold dollars modestly, unwilling to support the local unit when emergingmarket currencies faced a collective rout. “In the wake of the latest rupee depreciation, the RBI appears to be not as worried as it was in 2013,” said Anindya Banerjee, currency analyst at Kotak Securities.
“If the rupee is falling against the dollar in line with other emerging market currencies, it does not bother the central bank much as long as the decline is not exclusive to rupee.” Back in August 2013, the level of forex reserves were at about $275.5 billion compared with $400.1 billion now, show RBI data. “RBI’s reserves are enough, with an improving macro,” Banerjee said. The rupee, meanwhile, hit a new low at 70.40/$ on August 16. On August 13, when the rupee slid more than 1%, the RBI intervention was said to be muted. On the same day, all other emerging market currencies too bled, led by the Turkish lira that lost more than 40% this year.
“In the short to medium run, RBI has ample resources and policy instruments to manage INR volatility,” said Ananth Narayan, professor at SP Jain Institute of Management and Research (SPJIMR). “While it allowed 69.00 to break in the aftermath of the Turkey crisis, it has kept the market guessing on when and how it will intervene.” RBI’s intervention so far can be summed up as “do more, talk less,” he said. Earlier in the year, RBI is said to have defended the 69/$ level. RBI data released last week show that it sold $25 billion between April and June 2018. But market speculation is rife that the central bank has only intervened selectively.
On August 14 and 15, when the rupee crossed the psychological mark of 70/$, the RBI was suspected to have defended the level as other peer currencies did not fall. Instead, Turkish lira showed some signs of correction. “The intervention was more aggressive in 2013 amid a bunch of worries,” said KN Dey, founder of United Financials, a forex firm. “The quantum of fall was much sharper. The forex reserves level was much lower prompting the RBI to come out with strong measures under Raghuram Rajan.” Between April-end and August 28, the rupee slumped about 28% against the dollar in 2013. The latest data on RBI intervention are not yet available in August this year.
The Economic Times, 21st August 2018

Comments

Post a Comment

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

By
  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6
Post a Comment
Read more

Jaitley plans to cut MSME tax rate to 25%

By
Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem
1 comment
Read more

RBI aims to get inflation down to 4%, don't expect any rate cut this year: Amitabh Chaudhry, MD, Axis Bank

By
  Axis Bank may have cleaned up its bad loans and reoriented the business, but it has a long way to go in terms of market share and dominance in various segments, says chief executive Amitabh Chaudhry. The Reserve Bank of India would only tighten and not loosen regulations given the threats from technology and weak lending practices, Chaudhry tells ET. Edited excerpts:   Interest rates are debated widely and even two members of the Monetary Policy Committee are voting for a cut. How do you see this? I think the pause will continue for some time. The RBI has actually floated a balloon looking at an 8% GDP growth rate. They believe that if 8% GDP growth can be delivered, they would like to attack inflation and get it down to 4%. And if that is the case, then why will they cut rates? So, I don't see any reason why cutting rates would happen in a hurry. And once you're down the path of cutting rates, you don't want to kind of go back up. So, you have to be sure that when you st
Post a Comment
Read more