New Delhi: The rupee on Friday rose substantially as the US dollar fell across the board and news surfaced that the Reserve Bank of India had urged public sector oil companies to reduce their dollar purchases on the spot market, according to dealers.
The local currency decreased from 81.85 at the previous close to 81.35 at settlement. The rupee’s value against the dollar has dropped by 8.6% so far this year.
Since September 21, when the Federal Reserve hinted at a longer-than-expected US rate hiking cycle, the rupee’s devaluation has gotten worse. The value of the Indian rupee has decreased since then by 1.7%.
The rupee benefited from the Reserve Bank of India’s decision to choose a 50-basis-point rate increase on Friday, according to dealers, who noted that the central bank’s recurrent remark on the external situation signalled it would closely monitor the currency.
Higher domestic interest rates make local assets more appealing and exacerbate the rate gap with the US.
According to sources cited by Reuters on Friday, the RBI has made sure that $9 billion is accessible at some Indian banks’ overseas branches so that the three state-run refineries can use it instead of buying dollars on the spot market.
According to Reuters, the credit line is exclusively open to Indian Oil Corp, Hindustan Petroleum Corp, and Bharat Petroleum Corp.
“Rupee strengthened after it was reported that RBI was encouraging state-run Refinery to reduce dollar buying in the spot market and rather lean on a special credit line. This made USDINR move towards 81.16 levels and later bounced back for a close of 81.34,” said Shinhan Bank’s vice-president (Global Trading Centre) Kunal Sodhani.
“DXY (dollar index) did cool off sharply from highs of around 114.80 to 111.60 levels but could find some support and bounce back again. Overall, broader range for USDINR continues to be 80.60-82.00,” he said.