The rupee rose about 1 per cent on Monday after the RBI took steps to temper dollar demand in spot and derivatives markets, with likely intervention through dollar sales adding to the gains.
The rupee rose 1 per cent to 95.77 per dollar from 96.73 on Friday, outperforming mostly rangebound Asian peers and posting its best single-day gain since April, which had also been sparked by a set of measures to shore up the unit — involving redirecting oil companies’ dollar purchases away from the spot market and tightening hedging rules as the currency hovers near record lows.
The oil window is expected to take out about $10-12 billion of monthly dollar demand from the spot market, per government data on oil imports.
The recent moves follow a series of other measures taken to shield the currency and bolster the country’s balance of payments, strained by a heavy import bill due to high oil prices and persistent capital outflows.
SBI’s group chief economic advisor Soumya Kanti Ghosh said in a report that RBI has fired a “bazooka” of measures to arrest the depreciating trends in rupee value, with the currency likely to test the 94.50 levels in the short term.
The report also said that the government must seriously look into anchoring hot money flows into the equity segment by extending the holding period to say 2-3 years and abolishing the long-term capital gains tax for equity.