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Indian rupee snaps eight-day losing streak against dirham
DUBAI - The Indian rupee on Thursday snapped an eight-session losing run against the dollar-pegged dirham, underpinned by brisk dollar sales by corporates amid a string of measures to boost dollar liquidity.
From a historic low of 14.30 per dirham (52.74 per dollar) reached on Tuesday, the Indian currency rebounded to reach 14.13 (52.07), gaining 17 paise, on Thursday. Positive stock market performance also helped spur rupee’s slight recovery.
Currency analysts in Dubai said the Reserve Bank of India’s measures helped prop up the partially convertible Indian currency.
Most feel that the rupee’s plunge to record lows was unjustified by the fundamentals. It fall is driven by home grown panic.
“In the short-term, as long as exporters hold on to their dollar receipts in the hope that rupee will weaken further, there is a possibility of that the volatility will persist. Add to the rupee woes is the unfavourable current account balance. However, with the much anticipated RBI intervention by opening up its stockpile of more than $300 billion in foreign exchange reserves, the rupee stands to gain,” he said.
Currency dealers said the rupee has a good support at 52.80 to the dollar and once it breaks at that level, it would hit 53 per dollar. They believe only an RBI intervention could ward off the rupee’s slide beyond 53. But even the RBI has its limitation for direct intervention given the fact that it is gradually moving towards full rupee convertibility. Under the circumstance, RBI could only opt for an indirect intervention mechanism by instructing public sector banks to sell dollars.
The RBI on Wednesday eased rules on overseas borrowing by Indian firms by raising the cap on the total cost of some such loans and also relaxed guidelines on currency-swap hedges by companies to help them cope with exchange-rate volatility.
The RBI also raised the limit on interest rates banks can pay non-resident Indian depositors, in a bid to draw more capital inflows to support the falling rupee.
The dollar has risen nearly 17 per cent since April against the rupee, making the Indian currency the worst-performing unit in Asia.
Global banking major Credit Suisse said the fall in rupee value might not put additional pressure on India’s already-high inflation and interest rates, unless the Indian currency reaches Rs70 level versus the US dollar.
Dismissing the popular notion that the falling rupee would push higher the inflation, the bank said the Indian unit would need to reach 70 against the US dollar to prevent commodity price inflation from falling further.
Stoked by surging cost of imported goods, India’s inflation is in the double-digit numbers for more than 18 months now.
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