Why action on rupee, oil won't be 'knee-jerk' anymore

NEW DELHI: Amid a weak rupee, dear crude oil and widening present account deficit (CAD), the 'little need for a knee-jerk reaction' response has finally given technique to 'we would possibly announce something quickly' noises.

The government is reportedly going for a 'deliberate review' of the financial system through Prime Minister Narendra Modi this weekend. As a end result, on Wednesday, the rupee rallied probably the most in 18 months, strengthening up to 1.1 per cent to 71.92 per US dollar after hitting a brand new low of 72.91 in early buying and selling. It closed up 0.7 per cent at 72.18. Sensex rebounded up to 0.nine per cent to upward push 305 issues and benchmark 10-year bond yields dropped 5 basis issues to 8.13 per cent.

"There are dangers in using the overvaluation argument to not support the rupee when it is hitting multiple lows," says an analyst.

With August knowledge on trade deficit not likely to improve considerably and US Federal Reserve anticipated to hike rates of interest this month, there could be more pain for the rupee.

On the brighter aspect, Turkey, from the place rupee's bother began a month ago, has seen its currency gain as regards to three per cent within the ultimate week.

BACK TO 2013?

Among the measures that may be considered, the Reserve Bank of India (RBI) would possibly lift key charges in its subsequent financial coverage review on October five to stem foreign outflows while proceeding to promote dollars.

Government would possibly flip to wealthy NRIs to replenish foreign-currency reserves like in 2013.

It may additionally announce upper tasks on some merchandise to curtail imports, taking cue from 2013, when India hiked tasks on gold and jewelry. This time around, electronics imports have outstripped gold as India's second largest import item after oil.

In a further throwback to 2013, RBI can also open a special window for oil marketing firms to switch currency like it did back then.

OIL AT 50?

Union minister Nitin Gadkari stated earlier this week that diesel will cost Rs 50 a litre with ethanol mixing. On Wednesday, the federal government approved an over 25 per cent hike in the cost of ethanol for mixing in petrol in a bid to cut surplus sugar manufacturing.

Why action on rupee, oil won't be 'knee-jerk' anymore Why action on rupee, oil won't be 'knee-jerk' anymore Reviewed by kailash soni on September 13, 2018 Rating: 5
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