Rupee climb linked to fund inflows, RBI intervention

While RBI’s measures will make sure the rupee does not depreciate further, foreign fund flows would be essential for rupee appreciation. Expects the rupee to stabilise around 49 in the medium term.

However, renewed concerns from the debt-ridden euro zone may lead to another round of depreciation in the current quarter, though there may not be any sharp downward movement. “The dollar-rupee pair could move back higher towards the 50.50-51.00 mark but sharp depreciation is unlikely, due to the prospect of sustained RBI intervention. We could  expects the currency pair to move towards the 47.50-48.50 range by the end of next financial year. Ratings agency Crisil said in a report that the rupee may rise to 48 per dollar by March 2012

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• Active forex intervention in both spot and forward markets
• Higher interest rates on deposits for non-resident Indians
• Relaxing external commercial borrowings norms
• Prohibition of cancelling and rebooking of forward contracts
• Cut in interbank net open positions
• Past performance facility on currency hedging for importers cut from 75% to 25%
• Banks asked to report hedging status on loans over $25 million
• Governor says above measures may stay                         
• Banks to be asked to work out board-approved hedging policy for borrowers