Indian Rupee Falls as RBI Partially Rolls Back Intervention Measures
Indian Rupee Opens Lower Against US Dollar Amid Central Bank Rollback and US-Iran Tensions
The Indian rupee began the day on a lower note against the US dollar on April 21, following the Reserve Bank of India's (RBI) partial rollback of foreign exchange (FX) curbs alongside growing concerns over US-Iran relations. The rupee's performance was in contrast to other Asian currencies, which traded mixed throughout the day.
At 9:08 am, the domestic currency was trading at 93.33 against the US dollar, up 21 paise from its previous close of 93.12. This development came after the RBI partially rolled back restrictions it had imposed on corporates and other users, as well as on certain related-party transactions undertaken by banks. The RBI's move withdrew directions barring banks from offering non-deliverable forwards to resident and non-resident users and dropped curbs that prevented users from rebooking foreign exchange derivative contracts.
The restrictions were introduced approximately three weeks ago to prevent corporates from engaging in arbitrage between onshore and offshore markets. This move, coupled with prior measures to cap the onshore position size of banks, helped the rupee recover from a record low of 95.21 in late March.
According to Finrex, a significant portion of demand remains outside the market, and the Indian rupee is expected to trade in the range of 92.50 to 93.50 against the US dollar in the coming days, supported by the return of some dollar bids. Despite the restrictions, the buying syndrome continues in the market, as seen after April 10, the day when banks had to unwind all positions of arbitrage that they had taken.
In related economic news, oil prices fell, reversing gains from the previous session, on expectations of peace talks between the US and Iran this week, which could lead to an increase in supply from the key Middle East producing region.
Asian Currency Performance
| Currency | Change |
|---|---|
| Indonesian rupiah | +0.2% |
| Taiwan dollar | +0.2% |
| Philippine peso | +0.09% |
| Thai baht | -0.15% |
| Singapore dollar | -0.11% |
| Japanese yen | -0.11% |
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, remained steady at 98.087 after a 0.2% decline on Monday.
Investor Takeaway
The RBI's partial rollback of FX curbs may impact the Indian rupee's value against the US dollar.
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