Best Ru­pee Rally Sees RBI Boost­ing its Re­serves

The Economic Times - - Finance & Commodities -

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.

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