MUMBAI: The Indian rupee is set to build on its recovery at Tuesday’s open after the Reserve Bank of India announced more measures to alleviate pressure on the currency.
The Indian rupee is expected to open in the 95.50 to 95.60 range, per traders, having rallied 1% to settle at 95.77 to the dollar on Monday.
The rupee’s biggest single-advance in six months came after the RBI unveiled a series of measures to curb dollar demand.
The central bank reinforced that with direct market intervention, selling dollars to support the currency, according to traders.
The RBI has since taken further steps, widening the scope of a recently introduced cash deposit requirement for foreign-exchange hedges to cover all such transactions, including those used to hedge banks’ own assets and liabilities.
The central bank has further tightened rules for banks offering non-deliverable foreign-exchange derivatives to clients.
Lenders with units in India’s International Financial Services Centre and certain primary dealers, which were allowed to offer non-deliverable rupee derivatives to non-residents for any purpose, can now offer them only for hedging, the RBI said.
“The RBI is making its intentions clear in trying to push the rupee higher. Whether such forceful measures will ultimately deliver the desired outcome is another question,” a senior treasury official at a bank said.
The RBI can change the near-term dynamics, however, if the underlying pressures remain in place, these measures may not prove effective, he said.