The Indian rupee rose 2% over the week and closed at 94.96 against the dollar. This was the strongest weekly growth in the last seven months.
The Indian rupee gained 2% over the week and showed the most noticeable growth in seven months. On Friday the rate closed at 94.96 per dollar, adding 0.1% for the day.
The recovery occurred after the currency the previous week nearly reached a historic low of 96.96. The authorities introduced support measures: oil companies’ demand for dollars was redirected bypassing the market, and the cost of hedging against rupee weakening was raised. The regulator cut the limit on buying dollars without confirmation of obligations by 95% — to 5 million dollars.
The Reserve Bank of India directed roughly half of more than 140 billion dollars received under special measures to replenishing foreign exchange reserves. The central bank’s net forward liabilities in dollars at the end of August amounted to 200 billion dollars.
The goods trade balance deficit in September rose to 30.21 billion dollars against 26.8 billion dollars in August.
Analysts note that frequent changes in currency regulation rules may reduce policy predictability and lead to liquidity fragmentation. In their view, sustainable strengthening of the rupee is possible only if fundamental pressure on the economy eases.