Stories
Indian Rupee Rallies 2 Percent in Three Days, Escapes Worst Performer Spot
- •The Indian rupee surged about 2 percent over three sessions, narrowing its year-to-date decline to 5.4 percent.
- •The Indonesian rupiah is now Asia's worst-performing currency with a 6.8 percent drop this year.
- •The recent recovery was driven by RBI Governor Sanjay Malhotra's remarks on supporting the currency and curbing speculative trading.
- •The central bank introduced measures including a special foreign exchange window and raised the daily cash reserve ratio limit for banks.
- •A weaker US dollar also aided the rupee's recovery as investors awaited upcoming inflation data.
Key Questions Answered
The Indian rupee rallied about 2% over three sessions, driven by a weaker US dollar and aggressive intervention measures by the Reserve Bank of India (RBI). Governor Sanjay Malhotra announced the central bank's readiness to take further actions to stabilize the currency, while specific steps like a special foreign exchange window for oil companies and raising the daily cash reserve ratio limit helped curb speculative trading and absorb excess liquidity.
Following the rupee's recovery, the Indonesian rupiah emerged as Asia's worst-performing currency, having fallen 6.8% year to date. Meanwhile, the Philippine peso and Thai baht ranked second and third worst, down 6.3% and 6.2% respectively.
The RBI opened a special foreign exchange window to cover the dollar requirements of oil marketing companies and raised banks' daily cash reserve ratio (CRR) limit from 90% to 99% to absorb excess liquidity. Additionally, the central bank tightened rules on forex derivatives and restricted certain trading practices to curb speculative short-selling against the rupee.
