‘Rupee’ gave a befitting reply to the dollarImage Credit source: ai generated
There is a saying about 100 goldsmiths and one blacksmith. Rupee made it happen. There was a continuous decline in the rupee due to the dollar. Small daily declines were causing a lot of damage to the rupee. But in the last one week, the rupee took one hit against the dollar and managed to cause the biggest loss to the dollar in 3 years. In market terms, the rupee made the biggest jump in 3 years against the dollar.
In fact, after a long wait, the historic trade deal between India and America has breathed new life into the rupee. Although Friday’s trading session was a bit volatile, yet this week has proved to be a ‘booster dose’ for the Indian economy and currency.
Friday’s decline vs. the week’s historic gain
At the time of market closing on Friday, the rupee weakened slightly against the dollar and stood at the level of 90.6550. It saw a decline of 0.3% in day trading. The main reason for this was that in order to earn profits, many traders increased their purchases of dollars and withdrew their long bets on the rupee. In market terms, the decline increased slightly due to the triggering of ‘stop-loss’.
But, if we look at the bigger picture, this decline seems very minor. The rupee has gained 1.4% against the dollar in the entire week. This is the best performance of the rupee in a single week since January 2023, i.e. in the last three years. The real foundation of this boom was laid on Tuesday, when America and India announced a trade deal after months of negotiations.
RBI did not make any change in repo rate
Behind this strengthening of the rupee is not only the foreign trade agreement but also the confidence of the Reserve Bank of India (RBI). The central bank has not made any change in its key repo rate. After the trade agreements with America and Europe, the pressure on the economy has reduced and the future picture looks positive.
RBI has kept its monetary policy ‘neutral’. For the common man, this simply means that banks are currently in no mood to increase interest rates, due to which the loan EMI is expected to remain stable for some time to come. Barclays economists say that future decisions of RBI will depend on new economic data and changing circumstances, but at present the situation is under control.
Will this momentum last?
How sustainable this shine of the rupee is will largely depend on the attitude of foreign investors (FPIs). Last month, i.e. in January, foreign investors had withdrawn about 4 billion dollars from the Indian market, due to which the concern had increased. But the direction of the wind has changed in February. So far this month, foreign investors have bought shares worth about $1 billion.
Experts say that the trade deal has ended the atmosphere of pessimism from the market, but this rise of rupee will continue only if the flow of foreign investment remains continuous. At present, the dollar index in the global market has fallen slightly to 97.8 and a mixed effect is being seen in the Asian markets.