India’s rupee gains after RBI steps to support currency

August 12, 2013
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A bus conductor counts currency notes at the end of a trip in Mumbai on June 20, 2013/AFP
A bus conductor counts currency notes at the end of a trip in Mumbai on June 20, 2013/AFP

, MUMBAI, Aug 12 – India’s rupee gained marginally against the dollar on Monday, after the central bank announced fresh measures last week to drain cash from the market and prop up the ailing currency.

The rupee strengthened to 60.55 to the dollar, after closing last Thursday at 60.88, before markets shut on Friday for a local holiday.

Indian shares were also up 0.75 percent to 18,930.64 points on Monday, reacting to strong Asian market gains.

The Reserve Bank of India (RBI) announced on Thursday it would auction 220 billion rupees ($3.6 billion) worth of government cash management bills once a week in a bid to reduce supply from the financial system.

The first sale will take place later Monday.

The measures are the latest by the RBI to bolster the rupee, which hit a new lifetime low of 61.80 to the greenback on August 6.

The rupee is among the worst performing currencies in Asia this year, amid slackening domestic growth, rising overseas fund outflows, weak exports and a high current account deficit.

Sentiment has also improved after India last week named former International Monetary Fund chief economist Raghuram Rajan as its next central bank governor, when the current governor D. Subbarao exits next month.

“The forex market is reacting to all measures announced recently, including the announcement of a new RBI chief,” said Naveen Mathur of Mumbai’s Angel Broking.

“There is also optimism that the government will do more,” Mathur said.

The RBI last month announced steps to bolster the rupee, including raising short term interest rates and lowering the amount a bank can borrow or lend under its daily liquidity limit.

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