India’s central bank finally intervenes as the rupee reaches a new all-time low

  • The Reserve Bank of India stepped into avert a sharp fall in the rupee on Thursday when the rupee hit ₹72 mark.
  • It’s being speculated that the apex institution sold off dollars in the forex market to stablise the situation.
  • The past one month has seen the rupee depreciate by 2%.
The rupee breached an all-time low on Thursday, hitting the Rs72 mark but managed to revert after India’s central bank, the Reserve Bank of India (RBI), intervened. It’s speculated that the RBI sold off dollars in the forex market to hedge against, what would likely have been, a sharp fall in the rupee.

The rupee has been slipping since the initiation of the US-China trade war, the Turkish Lira crisis and the imposition of sanctions on Iran by the United States. Following suite, the market has been reacting ever since. Oil prices have surged, gold is probably the biggest gainer since its been seen as a safe haven commodity, essential commodities are becoming more expensive and Indian companies are starting to worry about their loans.

Many leading economists have criticised the lack of intervention by the RBI as the rupee hit new lows, week-on-week. During this month alone, the rupee has exhibited a fall of 2% coupling to over 12% for this year so far.

Arun Jaitley, the Finance Minister of India, stated that an intervention was not required since the movement of the rupee was predominantly due to global forces and it was only weakening against the dollar, while strengthening against others.

While the government may seem okay with gradual depreciation, the uncertainty of investors is growing. One of the primary is reasons of concern that while the rupee hit an all-time low on Thursday, oil prices were actually falling instead of increasing.

The falling rupee creates challenges for importers and sectors of the economy that rely heavily on imports like mobile manufacturing and other consumer goods. That being said, the rupee isn’t the only currency showing losses.

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