November 26, 2020
1 min read

RBI Should let Rupee appreciate: SBI Ecowrap

The Reserve Bank should let rupee appreciate to reduce imported inflation, a SBI Ecowrap report said on Wednesday.

According to the report, the US dollar is expected to remain weak due to fragile US economic conditions.

“It would do no harm for the RBI to lean with the wind and let the rupee appreciate which would reduce imported inflation when metal prices are rising, and clear the liquidity overhang to some extent,” it said.

“In fact, the large supply of dollars will ensure that rupee will not appreciate significantly from the current levels and this could potentially play to the advantage of the RBI even if it takes a hands off approach to rupee appreciation for the time being.”

As per the report, data from 1968 shows that dollar index has performed well under the Republican regime vis-a-vis Democratic regime and thus US election results have led to significantly improved capital inflows in emerging markets, including India.

In fact, India has already witnessed record inflows of $18 billion so far this fiscal.

Reserve Bank Of India

“Interestingly, in the merchant market (in both spot and forward segment) there was an excess supply of $40 billion during Apr’20- Sep’20 (till 18th),” the report said.

“However in the interbank market, the trend is quite opposite and there has been excess demand of $27 billion in the same period and this must have increased significantly by now.”

Besides, the report pointed out that overall, merchant dollar supply is far higher than demand as they anticipate a stronger rupee and hence may be holding to long position in dollars, without even adequate hedging.

“This is being balanced by excess dollar demand in interbank market, but the net effect is a large supply of dollars,” the report said.

Also Read: India’s IT spending to touch $81.9 Bn next year

Also Read: Nifty’s historic performance a booster dose for India Inc

Previous Story

Iran’s Covid-19 cases top 90k

Next Story

Festive spike in E-Com demand lesser than expected: Report

Latest from Economy

The UK’s Net Zero Journey

Achieving net zero is not just a technological but also a political and cultural undertaking, writes Hasil Farooque In 2019, the United Kingdom officially committed itself to eradicate all greenhouse gas emissions

India Outpaces Peers in Morgan Stanley Outlook

Global investment firm reaffirms India’s status as top-performing economy in latest growth outlook…reports Asian Lite News India is set to retain its position as the fastest-growing economy among nations tracked by Morgan

Microsoft Cuts Deep

The fresh job cuts come less than two months after Microsoft announced it was laying off more than 6,000 employees…reports Asian Lite News Microsoft is set to cut around 9,000 jobs —

Pakistan misses export target

Pakistan misses export target for 2024-25 despite modest growth, with rising imports widening the trade deficit and prompting urgent cost-cutting measures across key sectors….reports Asian Lite News Pakistan has fallen short of

Govt unveils ₹2 tr dose for jobs

Research Development and Innovation Scheme to provide 50-year interest-free loans to fund managers; focus on AI, quantum, biotech, digital agriculture and critical strategic tech In a double-dose bid to boost growth and
Go toTop