JOIN USMarket participants and bankers are expecting more sanity in the forex market as they feel that actual impact of the last week’s unconventional measures by the Reserve Bank of India (RBI) will be felt more in the coming weeks.
The optimism stems from reduced volatility in the market since the RBI intervention, though the rupee ended the week beginning Tuesday with a loss of 4 paise at 59.35 to the dollar.
“The worst is over for the rupee as volatility has backed off and clear stability is seen in the market,”treasury head at FirstRand Bank India, Harihar Krishnamoorthy said.
However, vice president, treasury, at private sector lender DCB Bank, Navin Raghuvanshi, said that recent measures are just the beginning and some more are required to stabilise the rupee.
In a drastic step, the RBI last Monday raised short-term borrowing rates, capped overall borrowing limit from the repo window for banks and announced sale of bonds via open market operations to stem the rupee rout.
The rupee moved in the 59.05-59.88 band post-RBI measures. The next day the government chipped in by easing FDI norms in 11 sectors, which also helped rupee.
“Exporters will come and start selling the dollar at Rs 58.80, and then at Rs 58.30 levels,” the chief executive of Mumbai-based brokerage firm Forexserve, Satyajit Kanjilal said.
Barclays Capital in a note said that it will be appropriate for the RBI and the government to follow up with more tangible measures to curb rupee weakness. It said that a forex-denominated offshore bond issuance remains the most potent near-term policy option for the government.