India’s volatile currency rose to a two-week high against its US counterpart during the local session as the Reserve Bank of India took decisive action to support its struggling asset.
The US Dollar to Indian Rupee Exchange Rate was in the region of 59.2600 as of 09:50 GMT
Yesterday the RBI issued the following statement: ‘The Reserve Bank will continue to closely monitor the markets, the liquidity situation and the macroeconomic developments and will take such other measures as may be necessary, consistent with the growth-inflation dynamics and macroeconomic stability.’
Now, at its latest policy meeting, the Indian central bank has opted to raise the marginal standing facility rate and bank rate from 8.25 per cent to 10.25 per cent. The benchmark repurchase rate was held at 7.25 per cent.
While the decision saw bonds drop by the most significant amount for nearly four years, the Rupee climbed to 59.4225 against the US Dollar after rallying by 0.8 per cent.
The US Dollar to Rupee Exchange Rate hit a low of 59.1200
Additionally, the RBI asserted that it would conduct open-market sales of government debt (worth in the region of 120 billion Rupees) on Thursday. The amount the RBI will lend to commercial banks through the daily repurchase window was also capped at 750 billion Rupees.
In response to the central bank’s decision, Barclays’ analysts stated: ‘While the move is marginally positive for the Rupee, through the carry channel, a key variable to monitor in the coming days is equity flows. The de facto tightening amid sluggish growth could be taken negatively by equities resulting in lower inflows.’
Similarly, strategist Khoon Goh noted: ‘While I expect the Rupee to gain a temporary reprieve, depreciation pressure will re-emerge if the economic fundamentals don’t improve in the near term.’
The Rupee also benefited from the declining odds of the Federal Reserve tapering stimulus. Yesterday’s US retail sales figures, which showed a gain of 0.4 per cent rather than the 0.8 per cent advance estimated, added to the argument that US stimulus needs to remain accommodative for some time to come. Federal Reserve Chairman Ben Bernanke is also scheduled to speak to congress tomorrow.
Current Rupee (INR) Exchange Rates
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The Pound Sterling/ Indian Rupee Exchange Rate is currently in the region of: 89.3684 >
The Euro/Indian Rupee Exchange Rate is currently in the region of: 77.4463 >
The US Dollar/Indian Rupee Exchange Rate is currently in the region of: 59.2600 <
The Australian Dollar/Indian Rupee Exchange Rate is currently in the region of: 54.3454 >
The New Zealand Dollar/Indian Rupee Exchange Rate is currently in the region of: 46.4489 >
The Canadian Dollar/Indian Rupee Exchange Rate is currently in the region of: 56.8149 >
(Correct as of 09:50 GMT)
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