Worst is over for the rupee. Here's why

The worst is over for the rupee as volatility has backed off and clear stability is seen in the market

hidden July 22, 2013 12:16:43 IST
Worst is over for the rupee. Here's why

Mumbai: The rupee today fell by nine paise to59.44 against the dollar in early trade at the InterbankForeign Exchange market on increased demand for the UScurrency from importers amid a weak opening in local equities.

Forex dealers said besides increased demand for dollarfrom importers, a weak opening in the domestic equity market,mainly put pressure on the domestic currency.The rupee had gained 32 paise to close at 59.35 againstthe dollar on Friday's trade.

Meanwhile, the BSE benchmark Sensex declined by 19.89points, or 0.10 percent, to Rs 20,129.96 in early tradetoday.

Market participants and bankers areexpecting more sanity in the forex market as they feel thatactual impact of the last week's unconventional measures bythe Central bank will be felt more in the coming weeks.

Worst is over for the rupee Heres why

Market participants and bankers are expecting more sanity in the forex market as they feel that actual impact of the last week's unconventional measures by the Central bank will be felt more in the coming weeks.

The optimism stems from the reduced volatility in themarket since the RBI intervention, though the rupee ended theweek beginning Tuesday with a loss of 4 paise at 59.35 to thegreenback.

"The worst is over for the rupee as volatility has backedoff and clear stability is seen in the market... The rupee hasnot gone beyond 60 to the dollar (since last Tuesday's RBImeasures)," treasury head at FirstRand Bank India, HariharKrishnamoorthy, told PTI.

However, Navin Raghuvanshi, vice president, treasury, atDevelopment Credit Bank, opined that "the recent measures arejust the beginning and some more measures are required tostabilises the rupee".

In a drastic step, RBI last Monday raised short-termborrowing rates, capped the overall borrowing limit from therepo window for banks and announced sale of bonds via the openmarket operations to stem the rupee rout, which on July 8 hadhit a life-time low of 61.21 to the greenback.

The rupee moved in the 59.05-59.88 band post-RBI measures.

The next day the government chipped in by easing FDI norms in11 sectors, which also helped rupee."The RBI will continue to support the rupee as they havebeen doing and a 58.50 level seems to be a good support forthe unit," said Raghuvanshi.

Forex market participants also expect more stability inthe rupee once exporters start selling dollars."Exporters will come and start selling the dollar at Rs58.80, and then at Rs 58.30 levels," said the Mumbai-basedbrokerage firm Forexserve, chief executive Satyajit Kanjilal.

Analysts feel that RBI and government would require totake more proactive steps to support the currency which haslost over 9 per cent since April. "This is just a beginning.Some more measures are required," said Raghuvanshi.

Barclays Capital in a note said it will be appropriatefor the RBI and the government to follow up with more tangiblemeasures to curb rupee weakness. "The absence of the samepotentially carries the risk of turning the current RBIinitiatives counter-productive," it said.

According to Barclays', a forex-denominated offshore bondissuance remains the most potent near-term policy option.

PTI

Updated Date:

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