- And now, India to get Raghuram Rajan Rs 10 notesBSE Sensex jumps 467 pts to close near 3-year high as market mood rises on RBI repo rateBSE Sensex jumps 467 pts to close near 3-year high as market mood rises on RBI repo rateIndian rupee gives up gains closes at 61.27 to the US dollar
The Reserve Bank of India (RBI) clarified on Friday that its emergency facility under which it has directly sold dollars to state refiners since late August remains open.
“The oil marketing companies (OMC) swap window remains operational. Any tapering of the window, as and when it occurs, will be done in a calibrated manner,” said the central bank in a press release.
The clarification came after reports suggested that the RBI may close the window, which in turn led to a sudden fall in the rupee.
The rupee, which had opened strong on the back of global dollar weakness, fell close to 1% in intra-day trade, hitting a low of 61.71/$.
The currency, however, recovered after the RBI's clarification and closed 0.1% lower at 61.2650/$.
“We have not heard anything regarding the closing of the window. The RBI may only consider closing it after flows come back strongly,” said NS Venkatesh, head, treasury, IDBI Bank.
“Some sort of staggering is possible while bringing back the oil dollar demand to the market,” he added.
The special dollar window for OMCs was announced on August 28, when the rupee slumped to a record low of 68.845 against the dollar, to temper excess demand for foreign exchange in the domestic market. The local currency has rebounded more than 12% since.
India’s three biggest state refiners bought about $300 million a day from the local spot market to pay for oil imports before the RBI move, Standard Chartered said in August.
“The RBI could be trying to signal that some sort of normalcy has been restored to the market,” said Vishnu Varathan, a senior economist at Mizuho Bank in Singapore.
“The markets will now be a bit cautious on the rupee and investors will be less inclined to buy the currency,” he said.
RBI governor Raghuram Rajan has said the bank will gradually scale back the dollar supplies as the rupee stabilises.
While some believe the current trading levels of the rupee are not sustainable since a large chunk of dollar demand remains out of the market, others feel that flows have picked up sufficiently to sustain current levels.