The Reserve Bank of India was considering selling dollars directly to oil importers to reduce exchange-rate volatility after the rupee fell to a record low yesterday, a central bank official said.
The recent widening of swings in the local currency might last only for a short period and would ease once global markets stabilised, the official said, asking not to be identified, citing central bank policy. India buys abroad 80 per cent of the oil it uses and crude shipments accounted for 32 per cent of the country’s $489-billion import bill in the year through March.
The rupee slid 1.3 per cent in Mumbai yesterday and touched a record low of 54.5 per dollar, according to data compiled by Bloomberg. A 0.4 per cent advance on Thursday pared its loss this quarter to 6.3 per cent, still Asia’s worst currency performance.
The central bank may offer dollars to oil companies at its daily reference rate for the local currency, according to B Mukherjee, director of finance at Hindustan Petroleum Corp, India’s third-largest state-run oil refiner.
“The Reserve Bank may sell dollars to importers at its reference rate whenever the rupee falls sharply, and this will reduce dollar demand in the market,” Mumbai-based Mukherjee said in an interview. “This has happened in the past and could again happen in the near future.”
The rupee’s one-month implied volatility, a measure of exchange-rate swings used to price options, rose 302 basis points, or 3.02 percentage points, since April 30 to 12.52 per cent.