(1888PressRelease)
October 09, 2007 - News that the central bank of India has intervened to attempt to curb the rise of the rupee vis-a-vis the dollar could act to put the rupee under pressure, it has been claimed.
The Reserve Bank of India (RBI) announced yesterday that, for the fourth time this financial year, it had raised the limit on the amount of market stabilisation debt it can sell as part of an effort to ensure it is afforded ample scope to quell the rise of the rupee.
Meanwhile, figures show that the RBI bought $38.1 billion in the first seven months of 2007 as part of this strategy.
However, the decision of the Federal Reserve to reduce interest rates on September 18th has prompted foreign funds to buy $5 billion of stocks in India in the ten subsequent sessions, ensuring that the rupee has remained strong in the process.
The RBI has therefore taken to advising the government on the best way to reduce capital inflows, according to the Business Standard newspaper
- with remedies proposed including introducing a minimum period for buyout companies to hold onto their investments.
"The central bank has shown that it will intervene, but will also tolerate steady appreciation - they know they can't fight the market anymore," the chief dealer with a foreign bank told Reuters.
Further analysis of the strength of the rupee on the Indian economy can be supplied by Aranca, an end-to-end provider of on-demand, custom investment, business and economic research.
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