5 reasons why the rupee has recovered 7% from historic lows

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After having fallen dramatically to a historic low of 68.81 to the dollar earlier this month, the rupee has staged a remarkable comeback. It has recovered to trade at around 63.30 levels, a gain of almost 7 per cent in a span of just 7 trading sessions. Here are 5 reasons why the rupee has staged a comeback.

Positive signs from Rajan

More often then not markets need a sentimental boost. They got it after Raghuram Rajan got appointed on Sept 5 as the new RBI governor. Interestingly, the rupee has not fallen a single trading day since his appointment and he has made quite a few announcements.

Rising crude tends to impact the rupee

Rising crude prices always weighs on the rupee as India imports 80% of its crude requirement. With a strike on Syria not an immediate threat, crude has retreated, which in turn has helped the rupee.

RBI has sold dollars to help the rupee

The RBI has been intervening in the forex markets according to reports. This has propped up the rupee and it would be interesting to see how much dollars the RBI has sold when data is released. When RBI sells dollars it helps the rupee to recover. 

A rally due to short covering

There was heavy short selling of the Indian rupee sparked by QE tapering fears and rising crude. When both fears eased there was a short covering rally which boosted the rupee value against the dollar. 

Trade deficit boost for the rupee

India's trade deficit narrowed to a five-month low in August, boosted by exports and lower imports, particularly of gold. Narrow trade deficit ensures that the current account deficit ends lower and helps push the rupee higher.

Read more about: raghuram rajan, rbi
Story first published: Friday, September 13, 2013, 8:46 [IST]
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