Free Press Journal

Rupee recovers on hopes of policy intervention


Mumbai : The rupee on Friday surged by another 34 paise to close at a one-week high of 71.84 against the US dollar on positive macro data and hopes of policy intervention by the government to defend the volatile currency.

Extending gains for a second session, the domestic unit hit a session high of 71.53 in early trade. Sustained dollar selling by exporters and banks along with the greenback’s weakness against other major Asian and emerging market currencies, in turn keeping the buoyant tone intact. Rupee also benefitted from the massive US Dollar re-pricing in the aftermath of the weak US inflation report, discounting the chances of Fed hiking rates four times this year.

A combination of positive macro-related developments after the country’s industrial production grew at 6.6 per cent in July and retail inflation cooled to a 10-month low of 3.69 per cent in August, strengthened the rupee sentiment.

Earlier today, official data showed WPI-based inflation eased to a four-month low of 4.53 per cent in August.      India’s benchmark 10-year sovereign yield softened to 8.12 per cent.  The rupee got a shot in the arm after the government said all steps will be taken to ensure the domestic currency does not depreciate to ‘unreasonable levels’, amid reports that Prime Minister Narendra Modi will take stock of the economic situation over the weekend.

The rupee had rebounded from an all-time low of 72.92 to end up a strong 51 paise to end at 72.18 to the dollar in the previous session Wednesday. The domestic currency has been sliding against the US dollar since August, depreciating over 6 per cent since then as oil prices rebounded and trade tensions revved up.

Emerging market currencies also showed some sign of stability as investors sighed with relief after Turkey’s central bank hiked its policy rate to 24 per cent to restore confidence in the lira. Meanwhile, crude prices clawed back some of its losses after suffering the largest daily drop in a month as concerns about oil supply are countering worries that emerging market crises and trade disputes could dent demand.

Forex reserves plunge below USD 400 bn mark

Mumbai : The country’s forex reserves declined by USD 819.5 million to USD 399.282 billion for the week to September 7—slipping below the USD 400-billion mark for the first time in over a year, Reserve Bank data showed on Friday.

This is the second consecutive week of major fall in the reserves which indicates that the central bank has been selling the greenback to fight the fall in rupee, which had crossed the 73-mark earlier this week, reports PTI. The local unit closed at 71.84 on Friday. The total reserves had dropped by USD 1.191 billion to USD 400.101 billion in the previous reporting week. In the week to September 7, foreign currency assets, a major component of the overall reserves, fell by USD 887.4 million to USD 375.099 billion.

Expressed in American dollar terms, foreign currency assets include the effect of appreciation/depreciation of non-US currencies such as the euro, pound and yen held in the reserves.

After remaining stable for years, gold reserves increased by USD 71.9 million to USD 20.234 billion in the reporting week. But the special drawing rights with the International Monetary Fund dipped by USD 1.5 million to USD 1.476 billion. The country’s reserve position with the Fund also decreased by USD 2.5 million to USD 2.474 billion, the apex bank said.