India’s rupee gained as the central bank garnered $136 billion under its capital-raising measures, far exceeding expectations and further boosting its war chest to defend the currency.
The rupee strengthened as much as 0.7% to 94.2713 per dollar on Thursday, its highest level in more than a month. The pair is trading below its 100-day moving average, with traders forecasting more gains as sentiment receives a boost from the massive inflows.
The Reserve Bank of India late Wednesday said lenders collected about $127 billion of dollar deposits through a special program aimed at overseas citizens. The inflows from two other programs were at $9.15 billion. The combined haul surpasses the $80 billion estimate provided by RBI Governor Sanjay Malhotra just last month.
“The key message to our clients is: the risk of sharp rupee depreciation has been curtailed with RBI’s foreign-exchange measures,” said Michael Wan, senior currency analyst at MUFG Bank Ltd. The robust inflows gives the central bank “a far larger ammunition” to defend against currency weakness, he said.
The impact has been visible in the currency market over the past few weeks, with traders pointing to the increased presence of the central bank to quell volatility and reshape expectations of persistent rupee weakness. The rupee is the second-best performer in Asia over the past month — Shinhan Bank predicts it may rise to as much as 93.50 in the coming days.
The overseas fund-raising measures were announced by the RBI in early June to bridge outflows from India’s capital markets, which had pushed the rupee to successive record lows. That had worsened strain on the country’s import bill, already facing pressure from surging oil prices due to the US-Iran war.
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