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Indian rupee to slide again without RBI intervention – News

By on April 26, 2021 0

The rupee has been volatile against other foreign currencies.

The Indian rupee could continue to weaken in the absence of strong intervention from the Reserve Bank of India even as the devastating outbreak of a second wave of the pandemic poses strong headwinds to the country’s economic rebound. country.

The rupee has been volatile against other foreign currencies. “Besides the surge in Covid-19 cases, factors such as the country’s economic performance, inflation outlook, interest rates and capital flows will have a daily impact on exchange rates,” said money experts. (Check out the latest gold / forex rates in UAE)

Economists said the umbrella bank will continue to remain passive as a weaker currency will help boost India’s exports. “In the absence of a strong RBI peg, the rupee could continue to weaken,” ANZ economists said.

Negative real interest rates, potential GDP and downward earnings revisions are also hampering the currency’s rally which slid against the dollar on Sunday at Rs74.93100.

The rupee has gained substantial value, comparable to other world currencies in the recent past, as the trade deficit and current account deficit have improved. However, with the second wave of coronavirus outbreak, the currency has seen a decline.

Analysts said the short-term fortunes of the rupee could be directly influenced by the RBI’s intention to prevent further depreciation of the currency as the surge in Covid-19 cases hits jobs and growth. The rupee has already lost 2.6 percent against the dollar so far this month, which puts it on the verge of marking its worst month since the pandemic hit the country early last year .

The Rupee is likely to trade with a depreciation bias due to a stronger dollar, relatively weaker emerging market or currencies, moderate inflows from emerging markets and rising cases of Covid- 19 in India, said Sameer Narang, chief economist at the Bank of Baroda.

A bimonthly poll showed bearish bets on the rupee hit their highest level since last April, as soaring infections ended what had been seen as a promising growth story in the region.

Traders expect the Rupee to stay in the 74.50-76.00 range against the greenback in the near term.

India reported 332,730 new daily cases on Friday, the highest single-day total in the world. Rising cases have been one of the main factors behind the recent decline in the rupee, but the RBI’s decision to engage in large bond purchases added to the downward momentum.

The RBI has pledged to buy 1 trillion bonds for the period April to June in its effort to temper rising bond yields to help the government borrow its $ 12.06 trillion in the market at rates low interest. He said he would do more in the future, and that would be alongside his regular open market bond purchases and special open market operations – the simultaneous sale and purchase of government securities. on different tenors – the equivalent of Operation Twist of the United States.

“We also believe that the RBI’s political priority is to keep a cover on G-sec [government bond] returns are more urgent than halting INR depreciation, ”ANZ economists wrote. The road ahead for the rupee will likely be complicated by rising inflation and weak economic fundamentals.

The RBI stressed that it is intervening to smooth volatility in the forex market. It bought dollars aggressively last year as investors poured into India, but economists are unsure whether the downside intervention will be so strong.

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Issac Jean

Editorial Director of Khaleej Times, is a well-connected Indian journalist and economic and financial commentator. He has worked in mainstream journalism in the UAE for 35 years, including 23 years with Khaleej Times. A graduate in English and a graduate in economics, he has won more than twenty awards. Acclaimed for his genuine and insightful analysis of global and regional business and economic trends, he is respected for his astute understanding of the local business scene.