The Reserve Bank of India (RBI) made a dramatic move to prop up its battered currency on Thursday, requiring exporters to sell half the foreign currency in their accounts, which helped to strengthen the rupee in morning trade.
The RBI also said the intraday open position trading can be five times the net overnight open limits available to them to improve liquidity in the market. Previously they could not exceed the overnight limit.
COMMENTARY
SUBRAMANIAN SHARMA, DIRECTOR, GREENBACK FOREX, MUMBAI
"RBI's move to make exporters convert 50 per cent of their existing foreign currency earnings into rupee balances is a significant move, will result in large near-term inflows.
"However, pent up dollar demand exists and the USD/INR will trade in 52-53.80 band in near term."
RADHIKA RAO, ECONOMIST, FORECAST PTE, SINGAPORE
"Steps to force exporters to convert at least half of the earnings into rupee accounts will improve dollar supply at home and ease downward pressure on the rupee.
"The RBI is not alone in taking such measures, as we recollect that Indonesia had imposed similar regulations last year, forcing exporters to retain earnings onshore..."
MARKET REACTION
- The rupee rose to 52.95 to the dollar after the measures from its Wednesday close of 53.82/83, which was a record closing low.
Copyright @Thomson Reuters 2012
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