Despite the various steps taken by the central bank, the pressure on the rupee has continued, which is mainly due to global factor
Whether by communicating or by curtailing communication, the Reserve Bank of India (RBI) is taking all unconventional steps to arrest the fall in the rupee.
In its latest move, RBI has told treasury officials of banks to not give rupee forecasts against the dollar – particularly to the media, analysts and in their reports. It affects market sentiments to a larger extent, particularly in a situation when rupee trading is volatile, it says.
“RBI does not want treasury officials to give rupee forecasts because it affects so many stakeholders. It also makes the market nervous,” said the treasury head of a public sector bank.
RBI has been concerned because the rupee has weakened by 12 per cent since the start of this financial year, and forecasts that say the rupee would weaken further, act as a dampener.
Many publications routinely carry out polls on several market-related issues including the level of rupee against the dollar in a particular timeframe, expectation from RBI policy, monthly inflation and index of industrial production figures.
Last month, the central bank has unexpectedly released the current account deficit (CAD) data of the January-March session before it was scheduled to be released. The move was interpreted as being one to calm nerves, as the rupee had hit an all time low against the dollar the previous day. The ploy yielded results, at least for a shorter span, as the rupee stabilised for the next few days as the fourth quarter CAD figures were better than expected.
The central bank’s hand is tied so far as using its foreign exchange reserves are concerned as the $285- billion kitty can only cover six and half months of imports.
Despite the various steps taken by the central bank, the pressure on the rupee has continued, which is mainly due to global factors that have made investors shift towards the dollar in a uncertain environment. The rupee is expected to further weaken in the coming week too.
On the back of encouraging data on US non-farm payrolls, the rupee is expected to weaken this week on concerns the US Federal Reserve might start pulling back its bond-buying programme soon. According to a treasury head of a private bank, the rupee might even touch a new all-time low, closer to 61.25, on Monday.
Foreign institutional investors (FIIS) have been selling domestic debt in a scenario when US treasuries are becoming more attractive. It is expected that FIIs would continue to sell domestic debt even this week on the back of recovery in the US economy.
On Friday, the rupee ended at 60.24 a dollar, compared with the previous close of 60.13. During intra-day trades, it touched a high of 60.01 and a low of 60.59, a level very close to its all-time low of 60.77 last month.
RBI on Friday, intervened in the foreign exchange market and sold dollars to help the weakening rupee. According to dealers, if the central bank had not done so, the rupee would have touched a new all-time low on Friday itself.
