India has drawn a firm line at 97 rupees per dollar as the Reserve Bank of India steps up its defense of the currency after it approached a record low. The RBI unveiled stringent curbs, including a special window for state-run oil companies’ dollar needs and a reserve requirement on certain foreign-exchange derivatives, reinforcing 97 as a tolerance threshold. The rupee surged 1.2% to 95.5963 per dollar on Monday, its biggest jump since April, though sustaining recovery remains challenging due to elevated oil prices and capital outflows.
Economists and foreign banks, including Abhishek Upadhyay of ICICI Securities and Shaun Lim of Maybank, view 97 as the RBI’s key defense level. The central bank has already tapped its diaspora deposit program, which raised a record $133 billion, boosting forex reserves to nearly $800 billion in early September before falling by $51 billion due to dollar sales. Additional measures include limiting banks’ daily net open positions to $100 million and introducing a foreign-exchange risk reserve requiring lenders to hold 20% of the notional value of derivative transactions above $2 million with the RBI.
RBI Governor Sanjay Malhotra said the rupee is undervalued on some gauges, and markets can be irrational short-term. Experts believe the RBI still has policy tools to prevent further depreciation and is buying time for oil prices to ease.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing