03 March, 2021

Gone For A Toss

But don’t panic. It’s just a dollar bull chasing the rupee.

Gone For A Toss

Sweat beads are trickling down RBI governor Bimal Jalan’s face as he watches the daily slide of the rupee against the dollar. Over the past 90 days, the rupee has depreciated by a huge 4.6 per cent vis-a-vis the US currency. All of last year it fell by just a little over 2 per cent.

When it crossed the Rs 45 to the dollar mark on July 21, Jalan was worried enough to raise the inter-bank interest rate by one per cent, followed by a 25 basis points hike in banks’ cash reserve ratio (CRR). Last week, four-day repo rates went up to 15 per cent. That apart, the RBI exhausted $1.8 billion of its reserves in an attempt to rein in the fall. All these were moves to suck Rs 15,000 crore out of the system in the central bank’s bid to reduce the demand-supply imbalance that existed between the two currencies. The first two moves, at least, were of little help as the rupee touched 45.77 to a dollar during intra-day trading last week. Even as one-month forward premia on the dollar shot up four percentage points to 7 per cent, while six month premia rose a per...

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