Rupee gains over 1.5% against dollar; RBI's interventions signal bullish trend
The Indian Rupee has bounced back strongly, gaining over 1.5% against the US dollar this week, closing below 90 for the first time in seven trading days. This recovery, driven by the RBI's strategic dollar sales and renewed FPI interest, signals a potential end to recent depreciation fears. For everyday Indians, a stronger Rupee means cheaper imports, potentially lower inflation, and increased purchasing power for international goods and services.
The Indian rupee has demonstrated a significant recovery this week, climbing over 1.5% against the US dollar. After teetering near record lows, the currency has now closed below 90 for the first time in seven trading days, settling at 89.27 per dollar, marking a one-month high. This robust rebound signals a potential end to recent depreciation worries and brings relief to the Indian market.
A primary driver behind this resurgence is the Reserve Bank of India's (RBI) strategic intervention. The central bank actively sold dollars to counter the rupee's downward trajectory, a move mirroring its decisive actions in previous periods of currency weakness. This proactive stance, coupled with a renewed interest from Foreign Portfolio Investors (FPIs), who are now buying after previous sales, has injected much-needed stability and upward momentum into the rupee.
The recovery isn't just due to the RBI's influence; positive shifts in India's trade balance are also playing a crucial role. A notable 20% annual spike in exports, the fastest growth in three years, and a 1.90% drop in imports have contributed to a narrower trade deficit, which hit a five-month low of $24.53 billion in November. This improved trade picture naturally strengthens the rupee by increasing demand for the local currency.
For everyday Indians, a stronger rupee holds significant benefits. It translates to cheaper imports, which can help mitigate inflation and make international goods and services more affordable. Experts suggest that despite recent volatility, the rupee's depreciation is not structural, with a recovery likely to continue. The RBI's liquidity boosts and a projected 7.3% GDP growth further underpin this optimistic outlook, reinforcing confidence in the rupee's long-term stability.
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