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Reserve Bank of India Steps

The Reserve Bank of India and Government of India plan to take steps to slow the decline of the Indian rupee against the US dollar. The rupee hit a record low for the second week in a row due to demand for dollars from oil importers and gold buyers. Finance Minister Pranab Mukherjee said the government will announce measures on Monday to improve market conditions. Any failure to take strong action could trigger further sell-offs and negatively impact markets.

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Bhargav Mevawala
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279 views2 pages

Reserve Bank of India Steps

The Reserve Bank of India and Government of India plan to take steps to slow the decline of the Indian rupee against the US dollar. The rupee hit a record low for the second week in a row due to demand for dollars from oil importers and gold buyers. Finance Minister Pranab Mukherjee said the government will announce measures on Monday to improve market conditions. Any failure to take strong action could trigger further sell-offs and negatively impact markets.

Uploaded by

Bhargav Mevawala
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Reserve Bank of India & GoI to initiate steps on Indian Rupee free fall.

Category: Forex Trading | INR | Nifty June 24, 2012 | Comments Off | Share 1

Reserve Bank of India & GoI to initiate steps on Indian Rupee free fall. Stock, Currency & Commodity markets globally & specially more so in India expected to see a very high level of volatility this week in view of the past weeks huge fall in INR, (Indian Rupee) & the measures to be initiated to control further depreciation & as well due to the expiry of the derivatives contracts this week. On the global front, a key summit of the European Union is scheduled on 28 and 29 June, 2012, to discuss the ongoing European debt crisis. Any positive fallout from the EU Summit could influence prices of commodities, including oil. Any positive & productive steps taken by the government or RBI to prop up the economy could cheer up the markets which have been showing strong resilience the entire week. A strong & sustained further momentum above 5122 may push markets further up to a very strong resistance range of 5230 to 5275. The Indian Rupee- INR June futures hit 57.39 on Friday against the US$ rising towards our next target of 58.60 forecasted last month when our earlier target of 56.35 was achieved. For the Indian Rupee trade this week, US$/INR till above 56.98 will rise further to 57.70, 58.015 & then 58.60. The Indian Rupee on Friday hit a record low of 57.32 against the dollar, posting its worst weekly fall (over 3%) in nine months, hurt by dollar demand from oil firms and gold importers. We will be able to take certain measures which will be announced on Monday, which will improve the market conditions; Finance Minister Pranab Mukherjee said on Saturday, after having discussed the situation with the central bank governor on Friday. Traders said the central bank likely sold $250-300 million dollars on Friday to rescue the Indian currency.

Any weakness by the Central Banks and / or the Governments in initiating strong concrete measures could trigger extremely negative sentiments & will cause massive further sell-offs. Finance Minister Pranab Mukherjee, who has held the post since 2009, will step down on June 26, as he prepares to stand in Julys presidential election. Prime Minister Manmohan Singh will take over the portfolio until a cabinet reshuffle next month. The Reserve Bank has bought 433 billion rupees of bonds from the market in the first quarter of the year that began April 1 to inject cash into the economy, about 33% of the amount it bought in the prior 12 months. The central bank will purchase 1.3 trillion rupees more of bonds in the remainder of the fiscal year, according to Nomura, while Barclays Plc predicts the amount will be 1 trillion rupees. RBI cut the benchmark repurchase rate by 50 basis points in April, the first reduction in three years. Gross domestic product (GDP) rose 5.3% in the first quarter, compared with 6.1% in the previous three months. Prime Minister Manmohan Singhs administration plans to increase debt sales by 12% to a record 5.69 trillion rupees this fiscal year to bridge its budget deficit.

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