The rupee strengthened on Monday after a drop in oil prices and supportive comments from the Reserve Bank of India governor, said market participants. It gained 47 paise to close at 95.24, making it Asia’s second best-performing currency, as per Bloomberg. The rupee has risen for the third consecutive session.
Central Bank Interventions
The RBI intervened heavily in recent sessions to support the rupee and pulled back from record lows. Over the past three sessions, the currency has gained over 1.5% with dollar supply from the Central Bank.
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“Over the past two days, the RBI has intervened aggressively, and today the governor made a positive statement on the rupee. Those actions, along with falling crude prices, are the two main reasons the rupee strengthened. The governor’s remarks arrived at a timely moment to lift market sentiment,” said Dilip Parmer, research analyst at HDFC Securities.
In an interview with Mint, RBI Governor Sanjay Malhotra acknowledged that the rupee may now be undervalued. He added that the rupee is likely to strengthen once the war ends and geopolitical conditions stabilise.
Long-Term Macro Pressures
In the calendar year so far, the rupee has declined over 6%. The real effective exchange rate (REER) fell further to 90.96 in April from 92.57 in March, the latest RBI bulletin showed. REER is a weighted index that compares a country’s currency against a basket of 40 foreign currencies, adjusted for inflation.
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“Along with renewed optimism about peace talks and a fall in oil prices, the RBI’s intervention also supported the rupee. The central bank was active selling dollars at 95.35 and 95.45,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors.
TOPICSrupeeThis article was first uploaded on May twenty-five, twenty twenty-six, at twenty-nine minutes past eleven in the night.