Intervention Impact: RBI expected to rein-in rising rupee

Source : IANS 2021-01-24 13:23:20

The Reserve Bank of India (RBI) is expected to rein in any sharp appreciation in rupee due to hefty FIIs' inflows during the upcoming week.

Experts contend that effects of large FIIs' inflows will be neutralised by the RBI as it aims to keep the country's exports competitiveness.

"Rendezvous with 73 is becoming interesting, with RBI defending it and showing resolve that chunky capital flows should not lead to a strong rupee and hurt India's trade deficit," said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.

"The RBI has made it clear that sovereign interest is paramount even at risk of being on the watch list for regular interventions. Equity markets look shaky now after a historical upmove and trade deficit rising strongly suggests that rupee strength might not come easy going forward."

The RBI is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.

Recently, the RBI was called out by the US Treasury Department to curtail its market activities.

"Rupee has appreciated back to 73 levels. In September month, when rupee came near these levels, RBI bought dollars aggressively and did not allow it to strengthen further," said Devarsh Vakil- Deputy Head of Retail Research at HDFC Securities.