The rupee on Tuesday surged 54 paise to close at 71.49 against the dollar following the Reserve Bank of India’s decision to transfer `1.76 lakh crore to the government. This is the biggest single-day gain seen by the currency in five months.
Dealers said the decision by RBI to transfer capital to the government has provided comfort to a market that was concerned over a potential increase in government borrowings that could have impacted the fiscal deficit.
The central bank’s transfer includes Rs 1.23 lakh crore of surplus for 2018-19 and Rs 52,637 crore of excess provisions identified as per revised Economic Capital Framework. The Union Budget had targeted Rs 90,000 crore as surplus transfer from the RBI. With the amount now rising to Rs 1.76 lakh crore, there would be a surplus of about Rs 86,000 crore, CARE report said.
It is noteworthy that the Rupee closed near its intraday high of 71.45 against the greenback, indicating a potential strength in upcoming days. This comes after the currency closed below the 72-mark on Monday to touch a nine-month low.
MS Gopikrishnan, independent currency expert, said traders were worried about the additional capital requirement of the government as they announced off-shore borrowings in the budget. “The RBI’s decision to transfer the capital has provided some relief to the markets. There is a hope that by and large this amount will take care of the government’s requirement,” he said.
The onshore Chinese yuan, which has been influencing the rupee movement in recent times, fell to 7.16 against the dollar on Tuesday. Market experts believe the RBI has been intervening in the forex markets over the last few days.
KN Dey, managing partner, United Financial Consultants, said the rupee closed stronger because of the unwinding of long positions by some corporates and banks on Tuesday. “But going forward, the Rupee might again turn back to 72 levels on account of weak Chinese yuan, which is still depreciating consistently,” he indicated.
