Stories
Rupee Extends Gains But Falters Past 95 Per Dollar On Outflows And Hedging
- •The rupee rose for a third consecutive session to hit a more than one-month peak before settling 0.1 percent higher at 95.15 per dollar.
- •Gains were capped below the 95 mark due to persistent dollar demand from importer hedging and portfolio outflows.
- •Reserve Bank of India Governor Sanjay Malhotra defended recent forex curbs and signalled readiness to take additional steps.
- •Traders interpreted central bank remarks as a sign of limited tolerance for further currency weakness.
- •Investors are now awaiting upcoming US consumer inflation data for fresh cues on global interest rate paths.
Key Questions Answered
The rupee's gains were capped below 95 per dollar due to persistent dollar demand linked to importer hedging and portfolio outflows. Although it climbed to 94.77 in early trading, it ultimately settled 0.1% higher at 95.15.
RBI Governor Sanjay Malhotra defended recent forex curbs designed to discourage speculative bets. These interventions include a special window for three public sector oil companies to meet dollar demands directly from the central bank, tighter regulations on forex derivatives, and a 20% foreign exchange risk reserve requirement for importer hedges.
Rupee swap markets are currently pricing in nearly 100 basis points of rate hikes over the next 12 months. Analysts note that if depreciation pressures intensify further, markets will likely price in an even higher probability of a front-loaded and aggressive rate-hike cycle.
