Indian rupee to extend recovery, RBI takes more steps to ease pressure

The Indian rupee is expected to extend its gains when trading opens on Tuesday, according to Business Recorder, after the Reserve Bank of India introduced additional steps aimed at easing pressure on the currency. Traders anticipate an opening range of 95.50 to 95.60 against the dollar, following a 1 per cent rally that brought the currency to 95.77 on Monday. That advance was the rupee's strongest single-session gain in six months.

The central bank has widened a recently introduced cash deposit requirement on foreign exchange hedges so it covers every such deal, including hedges tied to the banks' own assets and liabilities. It has also made the rules tighter for lenders offering non-deliverable derivatives to customers. Units in the International Financial Services Centre and some primary dealers may now provide these contracts only for hedging purposes, rather than for any purpose as previously allowed.

A senior treasury official at a bank said the measures clearly signal the central bank's intent to strengthen the rupee, but questioned whether such forceful steps would achieve the intended result. He added that if underlying pressures persist, the steps could fall short, although the central bank still has room to alter near-term conditions. Business Recorder carried the official's comments in its report.