RBI's strong grip set to lock rupee in place
By Anant Chandak
BENGALURU, Oct 3 (Reuters) -The Indian rupee will hold steady against the U.S. dollar over the coming year as the Reserve Bank of India will use its considerable FX reserves to reduce volatility and keep the currency on a tight leash, a Reuters poll found.
While most Asian currencies posted gains against the greenback following the Federal Reserve's larger-than-expected 50 basis point rate cut last month, the rupee has traded largely flat with the currency, losing just around 0.8% for the year.
That remarkable stability - which is not commonplace among emerging market currencies - was mostly because of the RBI's regular interventions in the foreign exchange market using its $692 billion in forex reserves.
The value of the partially convertible rupee is unlikely to change going forward, according to a Reuters poll of 40 FX strategists taken Sept. 30-Oct. 3.
It was expected to trade between 83.73 and 83.50 per dollar in the next six months, a 0.2%-0.5% drop from around 83.96/$ on Thursday.
The rupee was then forecast to gain about 1% to 83.30/$ in a year.
"We see no sign of change in RBI's pursuit of a higher reserves buffer, which would limit the appreciation potential for the rupee," noted Claudio Piron, emerging Asia FI/FX strategist at Bank of America.
"However, persistent dollar depreciation may result in a catch-up move in the rupee in the near term, with the potential for the rupee to go toward the recent range's bottom."
The rupee's trade-weighted real effective exchange rate stood at 105.45 in August, down from 107.45 in July, according to the RBI's monthly bulletin, suggesting the currency is overvalued by about 5%.
(Other stories from the October Reuters foreign exchange poll)
Reporting by Anant Chandak; Polling by Susobhan Sarkar and Rahul Trivedi; Editing by Jan Harvey
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
