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Tag: RBI

  • On Tuesday, the dollar struggled to find buyers as the market mood improved

    On Tuesday, the dollar struggled to find buyers as the market mood improved

    allowing the currency to remain reasonably resilient against its peers. Eurostat will publish the euro area’s first-quarter Gross Domestic Product (GDP) numbers. Later in the day, a 10-year US Treasury note auction will take place, and the US Census Bureau will release statistics on Wholesale Inventories. The trade action might continue muted ahead of the European Central Bank’s (ECB) policy announcements on Thursday and the US inflation data on Friday Despite the lack of high-impact data announcements, Wall Street’s major indexes rose sharply on Tuesday. US stock index futures, on the other hand, are down between 0.3 and 0.4 percent so far on Wednesday, indicating a cautious market sentiment. The US Dollar Index, which measures the value of the dollar against a basket of six major currencies, is up slightly at 102.50.






    The raised its key repo rate by 50 basis points to 4.9 percent on Wednesday, while keeping the reserve repo rate at 3.35 percent constant.

    After initially soaring to 77.95, the USD/INR has recovered to 77.70 China’s Vice Commerce Minister stated in a statement a day before the release of the country’s trade balance figures that importers and exporters are still under pressure owing to logistical issues and rising material prices. On Tuesday, the EUR/USD fell to a five-day low of 1.0652 before recovering its losses. In the European session, the pair is trading just below 1.0700.





    After dipping to a multi-week low below 1.2500 on Tuesday, the GBP/USD closed the day in positive territory, aided by risk flows. The pair has been maintaining its gains below 1.2600 at the time of writing.

    Above 133.00, the USD/JPY is at its highest level in 20 years. Japan’s GDP dropped by 0.5 percent on an annualised basis in the first quarter, according to official figures. On Wednesday, Bank of Japan Governor Haruhiko Kuroda stated that his comment on families’ acceptance of price rises had been withdrawn. “Rapid currency weakness in a short period of time, as observed recently, is undesirable,” Kuroda continued, although his words did not help the yen find buyers On Tuesday, gold took advantage of falling US T-bond rates to end a two-day losing skid. In the European session, XAU/USD appears to have stabilised at Bitcoin is continuing to fall after suffering minor daily losses on Tuesday, and was last noted around $30,500, down 2% on the day. Ethereum remains on the back foot, trading within a hair’s breadth of $1,800.

  • Ahead of the RBI policy announcement, India’s 10-year bond rate reaches 7.5 percent, the highest level since 2019

    Ahead of the RBI policy announcement, India’s 10-year bond rate reaches 7.5 percent, the highest level since 2019

    In early trade on Monday, India’s benchmark 10-year bond yield hit its highest level since March 2019 as investors braced for a 50-basis-point rate hike later this week while rising global crude oil prices weighed on the mood.







    The 10-year bond yield in India was trading at 7.4965 percent, up 4 basis points from the previous close. The yield climbed to 7.5004 percent, its highest level since March 22, 201 The will focus on interest rate rises in the coming months in a relatively short tightening cycle, with the repo rate expected to hit its terminal level early next year Oil prices jumped more than $2 in early trading on Monday as Saudi Arabia boosted pricing for its oil sales in July, indicating how tight supply remains despite OPEC+ agreeing to increase output over the next two months.

  • Rupee falls to a new intraday low, but recovers when RBI intervenes

    Rupee falls

    The rupee struck a new intra-day low on Thursday, breaching the 77.5/$ barrier, as the US dollar strengthened, before the Reserve Bank of India (RBI) intervened to aid minimise its losses.The rupee finished the day at 77.43 per dollar, down 18 paise or 0.24 percent from its previous close of 77.24 per dollar.

    “As the dollar strengthened, the rupee dropped to a new all-time low today (Thursday).” However, losses were limited when the RBI intervened to reduce currency volatility. “The dollar surged after US inflation climbed in April,” said Gaurang Somaiya, Motilal Oswal Financial Services’ Forex and Bullion Analyst.

    On May 5, the rupee touched an all-time closing low of 77.47/$.Following the global uncertainty induced by the prolonged Russia-Ukraine conflict, investors pulled out of riskier assets, putting pressure on the rupee. So far in FY23, the currency has declined 2.1 percent versus the dollar, with a further 4% depreciation expected in 2022.

    To stem the rupee’s decline, the central bank has increased its intervention in the foreign exchange markets — spot, futures, and off-shore. As a result, since September 2021, the foreign exchange reserves have decreased by $45 billion.
    Total FX reserves have dropped below $600 billion, and the market anticipates reserves to drop further more before rising. For the week ending April 29, total foreign exchange reserves were $597.7 billion.

    The RBI stated its net forward assets were $65.79 billion at the end of March 2022, according to its half-yearly report on foreign exchange reserve management released on Thursday. According to the report on foreign reserve management, the RBI has boosted its gold reserves by over 100 metric tonnes in the last two years.

    The RBI owned 760.42 tonnes of gold at the end of March 2022, up from 653.01 tonnes at the same time in 2020 and 695.31 metric tonnes in 2021.

  • To protect the rupee, the RBI may be cautious about spending FX reserves

    Reserve Bank of India

    When the Federal Reserve tightens, the Reserve Bank of India tries to defend its currency once more.

    Analysts expect it to launch a more limited defense this time, geared at fighting off the worst of speculative attacks rather than drawing a line in the sand when global capital flows are shifting and the Fed is expected to increase throughout the year.

    To save ammunition amid a broad dollar surge spurred by expectations of aggressive monetary tightening by the Federal Reserve, the RBI may choose a limited intervention policy. According to analysts, the RBI’s stated goal is to reduce excessive currency volatility, and reserves have declined in recent weeks, indicating market involvement.

    On Monday, the rupee fell to a new low of 77.53 per dollar as the dollar rose further and amid rising petroleum prices, threatening to extend the trade gap to uncharted heights. Foreign funds have been fleeing the country’s equities at an unprecedented rate, and a central bank that delayed tightening policy until last week hasn’t helped matters.

    When compared to its emerging Asian peers, the rupee’s movements have been orderly during the last month. This year, the currency has lost about 4% of its value and sits in the middle of the Asian pack.

    India’s central bank is intervening in all foreign exchange markets, including offshore markets, and will continue to do so to defend the rupee, which fell to a record low on Monday. A spokeswoman for the central bank was not immediately available for comment.

    According to the most recent data, the country’s foreign reserves were $598 billion. Although this is down 7% from a record high of over $640 billion in September due to a combination of intervention and valuation revisions, it still performs well on key metrics such as import coverage and short-term debt obligations, according to Radhika Rao, the senior economist at DBS Bank Ltd.

  • The Monetary Policy Committee (MPC) may go for a hike of up to 0.25 per cent in the reverse repo rate at which the RBI absorbs excess liquidity and leave the repo rate at which it lends, to narrow the policy rate corridor, a British brokerage said on Thursday.

    “Growth concerns amid spread of the Omicron variant and relatively benign inflation out-turns provide the RBI with enough room to maintain its growth-supportive monetary policies,” analysts at Barclays said, ahead of the resolution announcement next week.The RBI will hike the reverse repo rate by 0.20-0.25 per cent, given its liquidity management actions, it said.

    The brokerage joins a growing list of watchers expecting a reverse repo hike.

    Other analysts also blame the surprising hike in the government borrowing announced in the budget for the RBI’s likely call for policy normalisation.

    Barclays said the budget’s focus on capital expenditure is expected to provide a back-loaded fiscal impulse to the economy and does not change the macro backdrop, which includes concerns on inflation.

    On the surging global oil prices, which generally play into domestic inflation through corresponding price hikes of fuels locally, the brokerage said the inflationary pressures are unlikely to rise before the state elections finish by March, hinting of no pass-through.

    Even though the inflation is benign lately, the RBI needs to be vigilant, it said, pointing to its own forecasts suggesting the headline number staying in the upper end of the 2-6 per cent band and also the crude prices moving higher.

    It said till now, the liquidity signals from the RBI have been mixed, which have included shelving of the bond purchasing programme GSAP, an increase in both the quantum and cut-offs for voluntary reverse repo rate auctions and some bond sales in the secondary market last month.

    The policy guidance will be dovish when compared to RBI’s global peers who have been guiding or announcing rates hikes as inflations become into a concern, it said, adding that inflation in India should trend lower through 2022.

  • RBI rejects Religare Finvest’s proposal to rename itself

    The Reserve Bank of India rejected Religare Finvest Ltd’s proposal to rename itself Care Financial Services and declined to new management status to the existing management – a move that would derail debt restructuring of the finance company, said people aware of the matter.

    As per the RBI’s regulations, lenders cannot restructure loans of borrowers tagged as fraud, unless there is a change in management. Lenders have tagged its parent company Religare Enterprises Ltd (REL) as fraud.

    Religare Finvest itself filed a case of financial irregularities against REL and have also proposed a debt recast plan with REL as its promoter company. “There is a dichotomy here and this may be a reason for the banking regulator to reject the change in management status,” one of the persons quoted above said.

    Religare Finvest is under a corrective action plan (CAP) since January 2018, which restricts it from expanding business, including giving new loans. The existing board is seeking new management status since the old promoters, the Singh brothers, are no longer in control of the existing board. Also, a new management status would encourage its lenders to restructure its debt, the people said.

    Separately, to clean its books Religare Finvest on Wednesday declared Asset Reconstruction Company of India as the winning bidder for its ₹480-500 crore distressed loan auction. Arcil had offered ₹180-190 crore for the SME portfolio, said a third person aware of the deal.

    Religare did not respond to requests for comments.

    Meanwhile, some existing lenders are of the view that recast of the loan is possible only after the regulator removes the company from CAP, the people quoted above said.

    Last year, the insurance regulator permitted Religare Health Insurance to rename it as Care Health Insurance. However, the banking regulator was against a name change of a loss-making finance company, said the first person.

    In March 2020, Religare Finvest itself filed a case alleging financial irregularities against its former management following which a first information report against Religare Enterprises and its promoters, siblings Malvinder and Shivinder Mohan Singh, was filed.

    Subsequently, it submitted a debt recast plan with REL continuing to be its promoter company, according to the annual report of REL for FY21. “A proposed debt recast with the same management as a promoter that is tagged as fraud is not acceptable to RBI,” said one of the lenders aware of the matter.

    In March 2020, RBI rejected TCG Advisory’s proposal to acquire a stake in Religare Finvest and its housing finance subsidiary on grounds that the acquirer is not fit and proper.

    Subsequently, it submitted a debt recast plan with FEL continuing to be its promoter company, according to the annual report of REL for FY21. “A proposed debt recast with the same management as a promoter that is tagged as fraud is not acceptable to RBI,” said one of the lenders aware of the matter.

    Religare Finvest, which focuses on funding small and medium enterprises (SME), has ₹2,787 crore outstanding rated loans. State Bank of India has the highest exposure of ₹500 crore followed by Canara Bank at ₹485 crore