In its latest effort to save the battered rupee, the Reserve Bank of India said it will directly provide dollars to state oil companies, which may help the currency to open with strong gains.
In its latest effort to save the battered rupee, the Reserve Bank of India said it will directly provide dollars to state oil companies, which may help the currency to open with strong gains.
Rupees traded in markets outside of India recovered after the measures, with one-month forward contracts dealt at 68.30 from levels of around 70 rupees before the announcement.
“Immediately it should help the spot market and improve sentiment,” A. Prasanna, economist at ICICI Securities Primary Dealership told Reuters.
“But then we have to see how global markets move because some of fall in the last few days is also because of global developments.”
As reported in NDTV, India imports nearly 80 per cent of its oil requirements and oil bill accounts for the biggest dollar outflows from the country. State-run companies such as Indian Oil Corp, Hindustan Petroleum Corp, and Bharat Petroleum Corp are the biggest source of dollar demand in markets – worth $400 million to $500 million daily – and directing them to a special window is meant to reduce pressure on the rupee.
The central bank’s decision came after the rupee plummeted to a record low near 69 per dollar on Wednesday, growing the fear that foreign investors will continue to move out of a country facing hard economic challenges and unstable global markets.
As reported by NDTV, the strike in markets sent the rupee lurching 3.7 per cent to an all-time low of 68.85 with the unit closing just a touch off that, at 68.80/81 per dollar, its biggest single-day fall since October 1995.
-IANS
