| Mohan: Wait and watch
Mumbai, May 21: Reserve Bank deputy governor Rakesh Mohan says recent advances in the rupee are only a reflection of the conditions in global currency markets, an assessment that sets the tone for further gains.
The rupee has hardened to a two-year high, boosted in large part by swelling dollar inflows and the way the greenback wobbled against other global currencies.
Speaking to reporters at the World Bank’s annual conference on development economics in Bangalore today, Mohan said movements in the exchange rate were fine in the context of the swings in the international market and the global re-alignments in currencies. “We are watching the situation carefully and responding as it unfolds in the days ahead,” he added.
The central bank, he said, was “neither comfortable nor uncomfortable” with the appreciation of rupee against the dollar, but it was monitoring its progress to ensure stable and orderly conditions in the market. “We will continue to act so that there is no instability. As the central bank, we are certainly interested in maintaining orderly conditions,” he added.
Forex analysts interpret these comments to mean that while the RBI would step in to clamp down on irrational gyrations, it will not start a rupee-softening drill now.
The comments that show the central bank is not uneasy about the surge could drive up an already robust rupee to greater heights in the weeks ahead. If the dollars arrive the way they have in the past few days, analysts say the currency could soon hit the 46.50-mark.
As Mohan spoke in the Garden City, the rupee scaled another peak in Mumbai: it closed at 46.87, having tested 46.75, a new two-year crest, earlier in the day.
Market watchers said the RBI did intervene, albeit indirectly, to push the rupee off the day’s highs. Volumes were sparse as the nation-wide strike by trade unions to protest against the government’s policies kept nationalised banks away from the market.
The rupee surged on dollar supplies from foreign banks, but eased a little after intervention by the central bank and some corporate buying.
The currency has appreciated by 51 paise against the dollar in 11 consecutive sessions, the rise has been around 117 paise in this calendar year. Experts say there is still some room for gain, given that the rupee is undervalued 2.50 per cent on a trade-weighted basis. A reaction to Mohan’s remarks will be seen on Thursday.
In tune with trends in the spot segment of the forex market, the benchmark six-month forward premium nose-dived to 0.29 per cent from 0.48 per cent on Tuesday.
Gold lost its glitter on the bullion market today and crashed on emergence of heavy stockists' selling following a steep fall in the global prices.
Pure gold (99.9 purity), after a sharply weak start at Rs 5,725, fell further on increased selling and settled at Rs 5,700, showing a sharp fall of Rs 50 over yesterday’s close of Rs 5,750.