*rupee dollar: RBI meets bank executives to get market pulse – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-meets-bank-executives-to-get-market-pulse/articleshow/92835435.cms

Synopsis

This comes amid a falling rupee, which has triggered a slew of regulatory actions aimed at bringing back overseas inflows and cutting import-related dollar payments.

The Reserve Bank of India met treasury managers and senior executives of large banks on Tuesday to get the pulse of the market as the rupee plunged to a new low and investors turned cautious on buying more government bonds after rising yields inflicted losses on them, people familiar with the matter said.

This comes amid a falling rupee, which has triggered a slew of regulatory actions aimed at bringing back overseas inflows and cutting import-related dollar payments.

The central bank also sought feedback on its July 6 move to liberalise foreign exchange inflows, the people said.

An executive director at RBI is believed to have chaired the meeting, which was attended by representatives from about 18 banks, including public, private and foreign lenders.

RBI did not officially comment about the meeting.

Banks told the RBI that measures to boost forex flows, be it external commercial borrowings or deposits from non-resident Indians, will take time to trickle down, according to the people present at the meeting.

The rupee plunged to a fresh record low of 79.66 a dollar on Tuesday, before closing at 79.60.

The dollar index, which measures the unit against a basket of major currencies, surged 12.3% this year, amid the Russia-Ukraine conflict that has sparked supply disruptions.

In Europe, which is facing a recession, the euro currency hit parity with the US dollar for the first time in more than 20 years. Europe’s local unit on Tuesday touched a new low of around $1 as worries about the health of the global economy spooked investors.

Bank treasury heads present at the meeting said India’s fundamental and macro parameters were resilient, the rupee would find its own prudent value and that the macroeconomic situation would turn favourable for India in a quarter or two, sources said.

The rupee has lost 6.6% so far this year, becoming the seventh worst-performing Asian currency, compared to a 5.44% fall in the Chinese Renminbi’s value against the dollar, Bloomberg data compiled by ETIG showed.

The central bank asked participants at the meeting about the trajectory of the benchmark bond yield. Banks on average foresee a yield range of 7.75-8% for the benchmark bond this year.

The matrix, which provides a pricing scale for bond sales, is an important yardstick especially as the central bank manages the finance ministry’s record fundraising of about Rs 14.31 lakh crore (gross).

A benchmark yield assumes importance at a time when US Treasury yields are rising.

The wider the differential between the two sovereign gauges, the better is the lure for foreign portfolio investors.

Overseas funds have sold a net $1.87 billion in local debt securities so far this year.

“The RBI wants to ensure rupee liquidity as it is going through a rate hike cycle,” said an executive who participated in the meeting.

The banking regulator had begun to raise rates from May 4, when it hiked the benchmark repo rate by 40 basis points (bps) and followed it up with another 50 bps increase the next month.

Liquidity in the system plays a key role in transmitting benefits of those rate actions.

The surplus liquidity in the system is now at Rs 2.20 lakh crore compared to Rs 5.71 lakh crore on May 4, data from the RBI showed.

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