RBI May Be Following Relatively Hands Off Policy In Forex Market

The recent weakness in the Indian Rupee, which has been hitting a series of all-time lows in last few days, is expected to continue further, according to a latest research update from the State Bank of India (SBI). The largest domestic lender, in its research report, Ecowrap noted that rupee is one of the worst-performing among its Asian peers. One of the reasons could be the spike in current account deficit on the back of crude oil price increase. After appreciating marginally in January 2018, the rupee has witnessed depreciation every month. The rupee has now depreciated by 6.2% since June 2018 when the RBI started hiking rates. Even as the decline in rupee is in consonance with strengthening of US$, the decline may continue further and there are enough reasons to substantiate such. Given the inefficacy of sterilised intervention, the bank noted that RBI may be following a relatively hands off policy in forex market for now and hence the recent penchant for rupee to depreciate at a much faster rate.

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