Pressure on rupee may continue after temporary gains on RBI actions, say economists
The Reserve Bank of India has implemented emergency measures to stabilize the rupee, which is facing strong global pressure. Analysts indicate that the rupee may continue to decline despite these efforts. The rupee's drop is influenced by rising US bond yields and significant foreign investment outflows. Measures such as transaction limits and cash reserve requirements are aimed at curbing…
Kolkata: Recent emergency weekend measures by the Reserve Bank of India (RBI) aimed at stabilizing the weakening rupee may offer temporary relief, but the currency's fate remains largely dictated by global factors, economists say.The rupee is perilously close to historic lows, with analysts predicting a 3-4% decline in its value in the long term.
This decline is driven by global bond yields, particularly the US 10-year yield, which has surged to a quarter-century high of 5.3%.The emergency measures announced by the RBI on Saturday include limiting transaction volumes on derivative deals, restricting rebooking of cancelled contracts, and imposing a 20% cash reserve requirement on forex derivatives above $2 million.
Additionally, the central bank introduced a special window to meet daily dollar needs of three public sector oil retailers.Analysts view the recent RBI actions as a "throwback to the 'taper tantrum' response of 2013." However, they believe these measures will not fundamentally alter the underlying global backdrop that has led to the rupee's decline.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
