The rupee reached its lowest level in two months on Wednesday to close at Rs 39.35/36 against the US dollar, but foreign exchange traders felt the currency could continue to rise in the medium term.
Officials and market analysts, however, felt that the Reserve Bank of India (RBI) was likely to maintain status quo on the overall interest-rate regime, but could engage in more “active management” of foreign inflows in the short-term to prevent appreciation of the domestic currency beyond a certain limit. The trend has already been visible in the past few months. The RBI’s purchases of the dollar have increased from $4.42 billion in May to $11.4 billion in July this year. During the first eight months of the current calendar year, the apex bank has purchased $39.9 billion.
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