INR vs USD: Analysts expect the moves by the government and the RBI to provide some support to the rupeeThe rupee closed nearly unchanged against the US dollar on Thursday, amid mild gains in emerging market peers.
The currency gained some ground early in the session but gave up those advances to settle at 72.59 for the day, as against 72.60 the previous day.
Measures to boost liquidity in the system and curb the current account deficit announced by the government and the central bank are expected to ease some pressure on the currency, say analysts.
The rupee remains down more than 13 per cent against the greenback so far this year.1.
The rupee gained 22 paise to hit 72.38 at the day's strongest point, but gave up those advances by the end of the session.2.
The Reserve Bank of India (RBI) announced relaxed cash requirements for commercial banks and said it would provide "durable liquidity".The RBI eased the liquidity coverage ratio norms for commercial banks, allowing them to include up to two percentage points more of government securities in their statutory liquidity ratio reserves.3.
The move by the central bank came a day after the government announced hikes in custom duty applicable to 19 items, with an aim to bring down "non-essential imports".4.
Analysts expect the moves to support the rupee somewhat, but say high crude oil price remains a concern.5.
"Curb on imports is likely to reduce current and trade deficits which might reduce pressure on the rupee These factors might improve the sentiment for a temporary period, but crude price remains crucial for the domestic currency market," said IFA Global, a forex advisory firm.6.
The Federal Reserve on Wednesday raised key interest rates and said it foresees another rate hike in December, three more next year, and one in 2020.
Investors had anticipated the rate rise and outlook, but the removal of the word "accommodative" from the US central bank's policy statement pushed the dollar higher.MSCI's index for emerging market currencies edged up 0.2 per cent."The Fed rate hike will strengthen the dollar and a higher interest rate along with elevated crude oil prices will lead to an outflow of foreign capital, weakening the Indian rupee further in the short term," said CARE Ratings, a credit ratings agency.7.
Crude oil prices rose nearly 1 per cent on Thursday.
Brent - the international benchmark for crude oil - was near a four-year high of $82.55 a barrel hit earlier this week.
High crude oil prices along coupled with rupee depreciation tends to widen the current account deficit for India, which meets more than 80 per cent of its oil requirement through imports.
( Why crude oil prices have spiked)8.
"While raising of import tariffs on select goods and release of liquidity by RBI are some of the actions from the government and RBI in the right direction, the main concern is on the pressure build up on our current account deficit due to oil prices continuing to stay above $80 /barrel and showing no signs of weakness," said Salil Datar, CEO and executive director, Essel Finance VKC Forex.9.
Weakness in the domestic stock markets amid cautious trade ahead of the expiry of monthly derivatives contracts also put pressure on the rupee.10.
Mr Datar expects the rupee to continue in a range of 72.50-73.25 against the dollar.(With agency inputs)