Indian rupee looks set to slide further
Currency likely slip to 75.50-76 range against dollar
Indian rupee continued to slide against the UAE dirham with the rupee closing at Rs20.46 in the interbank forex market on Friday.
The rupee’s weakness against the dirham is a reflection of the currency’s decline against the US dollar to which the UAE currency is pegged.
The Indian currency registered its worst decline on Friday since the April 9 driven by rising oil prices and strengthening of dollar.
India imports more than 80 per cent of its domestic oil consumption, accounting for about 20 per cent of the total import bill, resulting in big forex outflow. Analysts expect the rupee could inch towards 75.50 and may even touch 76 against the dollar briefly, given the current scenario.
Latest data from the RBI showed India’s foreign exchange reserves stand at $637.477 billion in the week ended 1 October. The substantial reserve position gives RBI the elbow room to intervene in the forex market.
Indian rupee continued to slide against the UAE dirham with the rupee closing at Rs20.46 in the interbank forex market on Friday.
The rupee’s weakness against the dirham is a reflection of the currency’s decline against the US dollar to which the UAE currency is pegged.
The Indian currency registered its worst decline on Friday since the April 9 driven by rising oil prices and strengthening of dollar in the international forex markets.
The rupee tumbled 20 paise to close at 74.99 against the US dollar on Friday, as rising crude oil prices weighed on investor sentiment, even as the domestic equities gained.
At the interbank foreign exchange market, the local currency opened at 75 and witnessed an intraday high of 74.91 and a low of 75.16 against the US dollar in day trade.
The local unit finally settled at 74.99 a dollar, down 20 paise over its previous close.
The rupee is also likely to be weighed down by forex outflow resulting from foreign institutional selling on the equity markets. Although the domestic equities continued to post gains with the BSE Sensex closing 381.23 points or 0.64 per cent higher at 60,059.06, the gains were largely driven by domestic investors. Foreign institutional investors, on the other hand were net sellers fearing a technical correction.
Monetary policy
The Reserve Bank of India (RBI) Friday kept key interest rates unchanged for the eighth time in a row, slashed the inflation target for 2021-22 to 5.3 per cent, and indicated the unwinding of the accommodative policy as the economy shows signs of emerging from the impact of the Covid-19 pandemic. RBI has discontinued the government securities acquisition programme (G-SAP) as part of liquidity normalisation.
the RBI maintained an accommodative stance even as the economy is showing signs of recovery.