Rupee gains 60 paise vs dollar in early trade on RBI measures

Rupee gains 60 paise vs dollar in early trade on RBI measures

Concerned over the volatility in rupee, Chief Economic Advisor Kaushik Basu, on Thursday, made a case for RBI curbing speculative activity in the foreign exchange market.

“Rupee volatility is a concern and we are watching it,” Basu said, while addressing a UNESCAP event here.

He said the Reserve Bank intervenes in the forex market whenever there is sudden or a couple of fluctuations in Rupee.

“RBI is hands off if there is big fluctuation. Some are natural processes, but there are also speculative moves that players make on this and those have to be watched very very carefully by the RBI,” Basu said.

The Rupee, on Thursday, recovered by 60 paise to 53.24 against the US dollar in early trade, from Wednesay’s close of 53.82, after the RBI asked the exporters to sell 50 per cent of their retained foreign exchange earning.

The apex bank also fixed a limit for intra-day trading of foreign currency by banks. He said over the last 10 years, rupee has been inflating at 10 per cent, while dollar at 2 per cent per annum, which means the Rupee is losing value vis-a-vis dollar for the last few years.

“Certain amount of depreciation of the nominal exchange rate is purely a reflection of the differences in the inflation that have occurred over the last few years,” Basu said.


New norms for foreign currency FD utilisation

In bid to check outflow of forex, the Reserve Bank of India has tightened norms for utilisation of foreign currency fixed deposit funds.

The fund could be used by banks for lending to entities with risk management policy for managing the exchange rate volatility.

It can be used for rupee working capital or capital expenditure needs of exporters or corporates who have a natural hedge or a risk management policy. It is subject to the prudential and interest-rate norms, credit discipline and credit monitoring guidelines in force, it said. Last week, the Reserve Bank had raised the interest rate ceiling on NRI deposits in foreign currencies by up to 3 per cent to attract inflows.

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