Best Rupee Rally Sees RBI Boosting its Reserves
New York: The rupee’s sharpest rally in almost a year is giving the central bank scope to take out an insurance policy for what could be a tumultuous 2017. A resumption of stock and bond inflows and a Budget viewed as fiscally prudent and pro-growth spurred a1.9% gain against the dollar in the last three weeks, the best performance in Asia. The Reserve Bank of India is responding by buying dollars to bolster its foreign-exchange reserves. It added $1.6 billion to its stockpile in the week through February 3, the most since early September.
One of the world’s fastest growth rates, slowing inflation and a domestic market of 1.3 billion people has made India an attractive hedge against a possible rise in trade protectionism after President Donald Trump’s election win. Still, the Asian nation wouldn’t be immune to an external shock that causes investors to sour on developing-nation assets. “These rupee levels provide a great opportunity to buy dollars and build reserves just in case depreciating rupee pressures return,” said Viraj Patel, foreignexchange strategist at ING Groep.