RBI sells dollar to control the fall of rupee

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RBI sells dollar to control the fall of rupee
The Reserve Bank of India (RBI) intervened in foreign exchange market first time after 2009 crisis to control the fall of rupee any further. The partially convertible rupee ended at 47.66 to a dollar on Wednesday, lowest in two years.

The Reserve Bank of India (RBI) intervenes in foreign exchange market only if situation deteriorates or domestic currency faces pressure beyond its comfort zone. The rupee slid to the level of 48.02 against the dollar on Wednesday during the intra-day trading session, the level not seen since September 2009 due to the global financial turmoil.

The sharp fall in rupee couldn't stop the central bank to intervene in the foreign exchange market and it sold the dollars to base the currency's slide.

The rupee has slid 8.7% since its highest level of 43.855 to the dollar, seen on July 27 this year.

A depreciating rupee raises the cost of imports which could imbalance the current account deficit of the country, so as to prevent the fall further, it was necessary for the RBI to intervene. Though it was a good news for the exporters because they will be paid more for their products.

Euro zone woes intensified with fears of a Greek default after two French banks were downgraded by Moody's. The euro has depreciated more than 3% against the dollar over the week. So investors around the globe sensed safety in dollar and switched towards the dollar which also weighed on Indian rupee.

Analysts expect the Indian currency to depreciate further due to concerns over the impact of Europe's debt crisis on the global economy and a slowdown in domestic growth.


Read more about: currency, rbi, dollar, euro
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