Ru­pee makes strong re­cov­ery

Financial Chronicle - - FRONT PAGE - FALAKNAAZ SYED

RE­PORTS of an eco­nomic re­view meet­ing to be chaired by the prime min­is­ter over the week­end helped the ru­pee make a dra­matic re­cov­ery dur­ing the end of the trad­ing hours on Wed­nes­day, clos­ing the ses­sion at 72.19 against the dol­lar.

In ad­di­tion, a strong in­ter­ven­tion by the cen­tral bank and ex­porters sell­ing dol­lars helped the ru­pee to ap­pre­ci­ate, said dealers.

The cur­rency touched a record low of 72.92 per dol­lar be­fore it gained as much as 1.4 per cent to stand at 71.90. The par­tially con­vert­ible ru­pee ended the ses­sion at 72.19 per dol­lar. With this, the ru­pee has posted its big­gest sin­gle­ses­sion rise against the dol­lar since May 25.

Traders said the sen­ti­ment got a boost af­ter re­ports that PM would hold a meet­ing to dis­cuss the cur­rent eco­nomic sce­nario and to as­sess mea­sures to stem the fall in ru­pee's value over the week­end.

The gov­ern­ment is also ex­pected to an­nounce mea­sures to check the rise in oil prices, traders fur­ther said.

Anindya Ban­er­jee, cur­rency an­a­lyst at Ko­tak Se­cu­ri­ties said, “The ru­pee re­cov­ered af­ter com­ments from the min­istry of fi­nance of­fi­cials about a pos­si­ble meet­ing at the PMO over the steps to tackle ru­pee de­pre­ci­a­tion. Dol­lar ru­pee de­clined from 72.91 to 71.91 in a short span of time. The cen­tral bank may have in­ter­vened in the mar­ket as well to sell dol­lars. Over the near term, volatil­ity will be high as in­ter­ven­tions from the RBI and the gov­ern­ment is off­set by weak­ness in emerg­ing mar­ket cur­ren­cies and ris­ing oil prices. A range of 71.50 to 73.50 is ex­pected.”

Mad­havi Arora, econ­o­mist at Edel­weiss Se­cu­ri­ties said, “The ru­pee saw a dra­matic turn in the last one hour, re­act­ing to the news flow that the gov­ern­ment will re­view the health of the econ­omy dur­ing the week­end, with fo­cus on the Ru­pee. Me­dia sources also say that gov­ern­ment has stated it is not rul­ing out in­ter­est rate hike by the RBI. While it is dif­fi­cult to re­ally de­ci­pher a state­ment by gov­ern­ment of­fi­cial on a mone­tary pol­icy de­ci­sion (that falls purely in the purview of the MPC), it does raise the case for a pol­icy rate hike, al­beit still on the sched­uled Oc­to­ber 5 MPC pol­icy.”

“We still do not think a pre-emp­tive rate hike over the week­end is war­ranted at this point and the pol­icy mak­ers can ex­plore other tools as well… ru­pee’s ef­fec­tive re­ac­tion be­yond the knee-jerk to­day will de­pend on the sever­ity of mea­sures adopted by the pol­i­cy­mak­ers. We con­tinue to main­tain the Dol­lar-ru­pee range at 69-74 for re­main­der of FY19 but will closely watch out for the pol­icy space,” added Arora.

In­dia’s bench­mark bond yield ended at 8.13 per cent, down 5 ba­sis points on the day and re­treat­ing from the day’s high of 8.23 per­cent, its high­est since Novem­ber 14, 2014. The ru­pee has lost al­most 4 per cent its value in last 10 days of in­ces­sant de­pre­ci­a­tion and nearly 12 per cent since Jan­uary mak­ing it one of the worst per­form­ing Asian cur­ren­cies on ac­count of higher oil prices, an emerg­ing mar­kets sell­off and widen­ing In­dia’s cur­rent ac­count deficit.

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