Rupee Strengthens to 94.96 Against Dollar as RBI Implements Stricter Forex Regulations
Rupee extended its winning streak on Tuesday, strengthening to 94.96 against the US dollar. The currency opened at 95.53 in the interbank market and rose 82 paise, or 0.7%, from its previous close. This follows a significant rally on Monday, when the rupee gained 93 paise to close at 95.78, marking its largest single-day gain in over six months.
The recovery of the rupee is attributed to measures taken by the Reserve Bank of India (RBI) aimed at easing immediate dollar demand and curbing excessive positions in the foreign exchange market. Forex traders anticipate that these actions will reduce demand for dollars in the spot market and limit speculative bets against the rupee. Among the RBI’s initiatives are a dedicated dollar window for oil marketing companies and increased costs for certain foreign exchange hedging transactions.
RBI Moves, Dalal Street and More in Focus
The RBI announced tighter rules for foreign exchange derivatives on Saturday to further curb speculative positions against the rupee. Banks are now required to set aside a 20% reserve for dollar purchases exceeding $2 million. Additionally, the RBI has instructed authorized dealers not to allow users to rebook cancelled foreign exchange derivative contracts involving the rupee, affecting both deliverable and non-deliverable contracts.
On Tuesday, the dollar index, which measures the greenback against a basket of six currencies, slipped 0.15% to 102.43. Oil prices also declined, with Brent crude futures falling 1.11% to $105.47 per barrel. Meanwhile, Dalal Street saw positive movement, with the BSE Sensex gaining over 600 points to reach 72,584.50, and the NSE Nifty advancing 200 points to 22,575.30. However, foreign institutional investors continued to sell equities, with net sales amounting to Rs 1,708.48 crore on Monday. Government data released on Monday indicated that retail inflation rose sharply to 5.54% in September, primarily due to higher onion and food prices, although it remained within the RBI’s tolerance band.
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