The Reserve Bank of India (RBI) on Friday said it would continue to support the weakening rupee, by intervening in the foreign exchange markets as well as taking administrative measures. The rupee fell to a life-time intra-day low of 54.91 to the dollar on Friday, its third consecutive daily record low, the worst performer among Asian currencies so far this financial year.
Following intervention from RBI, as the currency approached the 55 per dollar mark on Friday, rupee appreciated and closed the day at 54.43 per dollar as compared to 54.49 per dollar yesterday. Traders said dollar sales by RBI and major foreign banks pulled the currency back from the day’s lows. “The flows would have come from the Exchange Earner’s Foreign Currency (EEFC) accounts or could be the result of banks squaring off positions at the weekend,” said a forex dealer with a domestic consulting firm. Foreign fund outflows of Rs 248 crore from choppy Indian markets also contributed to the rupee’s weakness. Over the week, the rupee lost 1.5 per cent or 78 paise against the greenback.
“The approach over the last few months has been a combination of intervention at times when we have felt it will help us stabilise, and some administrative action. This is the approach we will take now,” Subir Gokarn, deputy governor, RBI, said in Kolkata.
Amid widespread market expectation on the central bank opening a direct dollar window for oil companies, Gokarn said RBI was actively considering all such options to contain the fall.
Asked if RBI was mulling directly selling dollars to oil companies via a special window, as it did during the days of dollar scarcity in the 2008 global financial crisis, Gokarn said, “I think at this point in time, all options are open. All options are actively being considered.” A separate facility for oil companies will keep oil importers, which form the single largest chunk of dollar buyers, off the forex market.
The central bank has also mandated exporters to cut their dollar holdings.
“I think the steps we have taken have all contributed in some way to stabilising, and if we need to take more steps, it will be clearly in that direction,” Gokarn said. “In the last two-three days, pressure has been global and the currency has responded to that. We want to ensure that if we take any action there is some scope for impact.”