Rupee falls to near 80, rebounds to end unchanged at 79.88 – Times of India

MUMBAI: The rupee came very close to the 80 level against the US dollar on Friday, with the greenback being dealt at 79. 96 in the interbank foreign exchange market. At the same time, the Reserve Bank of India (RBI), which has been defending the rupee with dollar sales, said that foreign currency reserves fell by $8 billion during the week ended July 8.
The rupee opened weak at 79. 95 and touched the day’s low of 79. 96 before firming up to 79. 82 intraday. It gained as the greenback retraced some of its advances globally with the dollar index moving 0. 1% lower to 108. 43. Late evening in after-market hours, the dollar lost further ground. The domestic unit finally closed at 79. 88 — unchanged from Thursday’s close.

Forex reserves fell to a 15month low of $580. 3 billion during the week ended July 8. Foreign currency assets were down $6. 6 billion to $518 billion during the week. The value of RBI’s gold holdings also slipped by $1. 2 billion to $39 billion. The central bank has spent more than $40 billion during the current fiscal defending the rupee.
“The RBI has not yet undertaken many of the measures that it had in 2013 to attract dollars. These include taking over the exchange rate risk on banks’ foreign currency deposits or opening a separate window for oil marketing companies to reduce the demand for dollars in the market,” said a dealer. He added that these measures are taken when the central bank feels that the rupee has swung too much the other way and there is a scope for a correction.
With several central banks taking monetary actions, some banks believe that the RBI too could anno- unce off-cycle measures to remain in tune with other markets. Earlier this week, speaking at a Singapore Indian Chamber of Commerce event, RBI governor Shaktikanta Das had said that the central bank is not targeting any level for the rupee. “We do not have a level in mind, but our endeavour is to ensure there is orderly evolution of the rupee in both ways,” he had said.
The rupee has weakened by about 7% against the dollar during the current year. “The rupee will always have a weakening bias against the dollar as India is a current account deficit country. This means that the demand for dollars is constantly outstripping the supply. While capital flows do cause the rupee to firm up occasionally, one has to bear in mind that these flows are liabilities and can be withdrawn by the investors,” said a banker.