Much to the country’s relief, Indian rupee today strengthened by 28 paise to 72.70 against the US dollar in early trade at the Interbank Foreign Exchange market. The domestic currency recovered from its all-time low on fresh selling of the US currency by exporters and banks. Citing forex dealers, PTI reported that dollar-selling by exporters and banks, easing crude prices in the global market and weakness in the dollar against other currencies overseas, helped the domestic currency rebound.
A higher opening in the equity market is also stated to have supported the recovery of Indian rupee. The domestic unit on Tuesday slid further by 47 paise to settle at a record low of 72.98 after scaling an all-time low of 72.99 (intra-day) against the US currency. This was reportedly in the wake of surging crude oil prices and escalating trade war worries.
The BSE benchmark Sensex today recovered by 142.26 points, or 0.38 per cent, to 37,432.93 in the opening trade.
Meanwhile, a State Bank of India (SBI) Ecowrap report suggested yesterday that the Reserve Bank of India (RBI) should intervene in both spot and forward markets to arrest rupee depreciation.
The report stated that during the June 2008 to May 2009 period, when rupee depreciated by 13 per cent, the RBI sold dollars worth $43 billion, though the forex reserves at that time stood at $312 billion.
Even during 1990s, when the total forex reserve was less than $40 billion, the RBI had reportedly intervened in the market by selling 8-9 per cent of total reserve to rein in a fall in rupee.
“So, we believe in the present scenario, RBI could go up to its tolerance limit of 10 per cent (a crude proxy of the average ratio over all periods) by selling at least an additional $25 billion in the forex market,” the report said.
The RBI is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.