How mere PM Modi Sunday meeting plan rescued Indian rupee

Expectations of an economic package following the news of Prime Minister Narendra Modi’s plans of holding a review meeting on the economy and the currency on Sunday saw the rupee surging 83 paise to 71.86 per dollar in late afternoon trade - one of the strongest rallies in nearly 18 months.

Forex traders said Reserve Bank of India (RBI) was also present in the market, selling close to $1-1.5 billion that helped the rupee shave off losses.

The unit ended a hectic day of trading, rebounding 51 paise at 72.18, after crashing to a lifetime low of 72.91 in early trade. During the day it ranged between Rs 71.86 and Rs 72.91.

After the rupee began to gain ground, Union economic affairs secretary Subhash Chandra Garg also tweeted to say that government and RBI are on the job to protect the rupee.

“Government and RBI will do everything to ensure that rupee does not slide to unreasonable levels. Today’s correction seems to reflect that realisation,” Garg tweeted. He said there was “no fundamental rationale” for the rupee to depreciate to levels seen till Tuesday. “It reflected an over-reaction of market operators,” Garg said on Wednesday.

“The intervention was to the tune of $1-1.5 billion, but that is only a drop in the ocean in a market where the average daily trading volume is $20 billion.

The news that that government would meet for an economic package for the currency rescued the rupee from further losses,” a forex trader with a bank said.

“We still hold on to the view that a strong intervention by RBI would strengthen the rupee. The rebound was after intervention from RBI followed up by the plans of the government to hold review meetings on the currency and economy. So the market is expecting some action so the rupee strengthened. The government did some verbal intervention and RBI did its bit, both of which helped the currency,” said M S Gopikrishnan, head, financial markets, Standard Chartered Bank.

Another forex trader with a foreign bank said, “RBI has left all the talking to the government while it sits mum, intervening feebly in the market. If no concrete measures are taken on Sunday, it will take no time for the rupee to depreciate sharply.”

Source: DNA Money