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Rupee: Will Reliance Industries’ dollar liquidity make the rupee stable?

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Mumbai: The rupee owes a lot to India’s biggest company, Reliance Industries, for its recent buoyancy.

As record funds are set flow into the company that is deleveraging its books, the rupee is set to climb further in the short run. Plus, global liquidity of the dollar should help.

Currency traders expect the rupee to trade in the band of 74.5-76, coming off lows hit late March and April. The rupee was just shy of 77 to a dollar less than three weeks ago.

“As companies are deleveraging from offshore, the moves will certainly provide support to the rupee (against the dollar),” said Ashish Vaidya, MD and head of treasury and markets at DBS Bank. “The rupee offers higher returns in terms of interest rates.”

Meanwhile, Reliance is set to launch a $7-billion rights issue, the largest in the country. Many overseas investors are expected to invest in that offer. Besides, Facebook is leading the list of marquee global investors that are pumping big money into the Jio Platforms of Reliance, which became the first Indian company to log Rs 10 lakh crore in market value.

The three-month Bloomberg Option Volatility, a gauge for market swings in exchange rates, dropped about 40 basis points between last Thursday and Tuesday this week. It is now at 8.81%.

The rupee gained 0.31 percent Tuesday to close at 75.50 a dollar.

The U.S. Federal Reserve launched a temporary facility permitting other central banks to swap treasuries for dollars, a move that helps infusing dollar liquidity.

“The rupee has regained some stability in the recent weeks after hitting record lows during March,” said B. Prasanna, group head for global markets sales, trading and research at ICICI Bank. “A period of stability is seen in overseas inflows, be it from expectations of large FDI flows or resurgence in global dollar liquidity after the US FOMC balance sheet expansion measures.”

Among Asian markets, India ranks sixth yielding 0.33 percent this financial year in terms of total investment returns, which is derived after adjusting interest income with the exchange rate.

“The rupee is calming down after a spell of wild trading sessions,” said Anindya Banerjee, currency analyst at Kotak Securities. “The local unit is stabilising after touching new record lows amid a bout of expected dollar inflows.”

The rupee hit a new record low at 76.83 to a dollar on April 21 this year amid global risk aversion triggered by the coronavirus outbreak. Foreign portfolio investors (FPI) net sold Rs 1.09 lakh crore of local securities this calendar year so far, and sales by FPIs remain a potential risk factor for the currency.

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