Rupee Gives Up Gains as Tariff Worries Blunt RBI’s Moves
Market Dynamics: A Closer Look at the Rupee
– Foreign portfolio investors (FPI) sold shares amounting to ₹3,367.1 crore on Thursday.
– Domestic institutions stepped in to buy ₹3,701.2 crore worth of shares.
– In total, FPIs have offloaded ₹6,856 crore in the month of January.
RBI’s Intervention: Indispensable Yet Insufficient
The Reserve Bank of India (RBI) aggressively intervened to bolster the rupee for the second consecutive session. However, despite these efforts, the currency ended the day lower, signifying that the RBI’s interventions were not fully effective. Traders noted that the rupee initially strengthened to an intraday high of 89.75 following RBI actions but ultimately closed at 90.01, down from 89.881 the previous session.
– The currency fluctuated between 89.75 and 90.13 during trading hours.
– RBI’s intervention was noted at levels above 90, aiming to stabilize the currency.
Tariff Hike: A Double-Edged Sword
The announcement of a proposed 500% tariff hike triggered only a modest reaction, with the exchange rate shifting by approximately 10 paise. Traders commented on the muted impact of the tariff news, suggesting that RBI’s intervention had a more pronounced effect on market sentiments.
– A senior trader from a public sector bank noted, “The intervention outweighed tariff comments and weakness due to FPI outflows.”
– Anil Bhansali, head of treasury at Finrex Treasury Advisors, emphasized the potential pitfalls for India, stating, “Even a 10 basis point increase in tariffs could shift market sentiment dramatically, pushing us from ‘deal is in the pipeline’ to ‘back to square one’, which adds further pressure on the rupee.”
Future Outlook
Looking ahead, dealers anticipate the rupee to trade in a range between 89.80 and 90.30 on Friday. The upcoming US non-farm payrolls data is expected to play a significant role in market movements.
In summary, while the RBI’s measures aimed to protect the rupee, external factors like FPI selling and tariff concerns continue to exert pressure on the currency. The interplay of these factors will be crucial to watch in the days to come.