With active state-run banks and suspected RBI dollar sales, the local currency closes higher at 88.69 per dollar, and traders predict more improvement.
Due to probable Reserve Bank of India (RBI) intervention via dollar sales, the rupee recovered some ground versus the US dollar despite a strong dollar, according to traders.
After closing at 88.79 per dollar, the local currency closed at 88.69 per dollar. During the day, it increased to 88.50 per dollar. By the conclusion of the transaction, however, it had lost some gains.
“Strong central bank intervention helped to control further devaluation, with the RBI and state-run banks becoming more active around the 88.80 mark,” said Abhishek Goenka, founder and CEO of IFA Global. “The RBI’s defensive stance is stabilizing the USD/INR, which is still caught in a tight trading area of around 88.40-88.80,” he said.
Although short-term volatility may continue, market participants predicted that the rupee may climb to around 86 per dollar by the end of the year.
“The USD/INR allowed the importers a chance to hedge their payments as it dropped to 88.50 but could not maintain its gains as it finished at 88.6850, a healthy 19 paise off the highs,” said Anil Kumar Bhansali, executive director and head of treasury at Finrex Treasury Advisors LLP. Flows came from a foreign bank that bought out a local bank. With US President Donald Trump and Prime Minister Narendra Modi speaking and the latter praising the former for advancing trade discussions, a shift in attitude was also a contributing cause to the increase.
In the current fiscal year, the rupee has lost 3.63 percent of its value so far, while in the current calendar year, it has lost 3.47 percent. Nonetheless, the local currency has gained 0.1% thus far in October.
In the meanwhile, India’s foreign currency reserves dropped to $699.9 billion in the week ending October 3—a decrease of $276 million. The $4 billion drop in foreign currency holdings caused a fall in total reserves. But in the same time frame, gold reserves rose by $3.7 billion.