The Indian rupee rose sharply by about 1% at the opening of trading on Monday following measures announced by the Reserve Bank of India aimed at reducing pressure on the currency.
The rupee began the session at 95.76 against the US dollar, compared with its previous close of 96.73 on Friday. It ranked among Asia’s strongest-performing currencies for the day, even as most regional currencies traded in a narrow range. Despite the rebound, the rupee has still declined 6.6% against the dollar so far this year.
On Saturday, the central bank announced steps targeting two key sources of demand for dollars. These include sustained purchases by oil marketing companies amid elevated crude prices and increased demand from corporates seeking to hedge against further rupee weakness. Expectations of additional depreciation had prompted importers to buy more forward dollars, creating a cycle that added to pressure on the currency.
The measures include a ban on companies rebooking cancelled rupee-linked derivatives, a reduction in the threshold for transactions that lack an underlying exposure, and a requirement for banks to hold a 20% cash reserve against certain foreign-exchange contracts. These changes are expected to raise the cost of hedging against a weaker rupee.
ALSO READ : India-US Trade Deal Broadly Concluded, Says Goyal; Clarifies Sitharaman’s “Plateau” Remark
The restrictions apply to current account transactions. The 20% cash reserve requirement does not cover companies hedging external commercial borrowings or foreign portfolio investors hedging their investments in India.
Analysts have noted that while the immediate impact has been positive, the sustainability of the gains will depend on whether underlying pressures ease. Factors such as crude oil prices, foreign portfolio flows and the broader direction of the US dollar are expected to continue influencing the rupee’s path.
-
-
-
-
