The Indian rupee opened sharply stronger against the US dollar on Thursday, buoyed by likely central bank intervention and easing bond yields, even as policymakers weigh a range of measures to curb currency volatility. The rupee opened at 96.30 per dollar, a notable gain from Wednesday’s close of 96.82, reflecting improved sentiment in early trade. Traders attributed the strengthening to dollar sales by the Reserve Bank of India (RBI) in offshore markets, a move aimed at supporting the domestic currency.
RBI has likely sold US dollars in offshore markets to stabilise the rupee. Such intervention typically helps curb speculative pressure and reduces excessive volatility in the currency. In parallel, India’s bond market also reacted positively. The yield on the benchmark 10-year government bond fell 5 basis points to 7.03 per cent, indicating improved liquidity conditions and some easing of investor concerns.
A Bloomberg report also noted that the RBI is actively exploring a broad toolkit to support the rupee, including tightening monetary policy if needed and mobilising foreign currency resources.
According to the report, policymakers are also considering raising dollars through deposit schemes targeted at non-resident Indians (NRIs) as well as the potential issuance of a sovereign dollar bond. These measures are designed to increase foreign currency inflows and ease pressure on the rupee. The report further noted that the RBI’s top priority is to halt the depreciation of the domestic currency, and the central bank is prepared to take decisive action to achieve this objective.
The Indian rupee could weaken further and approach the psychologically significant 100 mark against the US dollar within the next six months if external pressures, particularly elevated oil prices, persist, Bhansali had earlier said.
Bhansali said that policy intervention could slow or even reverse the rupee’s slide. “If government of India doesn’t take any further steps… then the pressure continues,” he said, while listing potential measures such as tweaking FII tax norms, reducing outward remittance limits under the Liberalised Remittance Scheme, and attracting fresh inflows through instruments like foreign bonds or NRI deposit schemes. “If such types of measures are taken, then we can see the rupee’s depreciation pausing…the dollar will be moving down,” he added.
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