Rupee’s fall being linked to RBI’s dollar buying spree

Rupee’s fall being linked to RBI’s dollar buying spreeThe ongoing depreciation in the value of rupee is being linked to suspected dollar buying by the Reserve bank of India (RBI).

The partly-convertible Indian rupee traded at 60.30 per U. S. dollar in morning session on Friday, at a weaker level than its previous close of 60.1650/1750 per dollar.

While demand for dollar by importers is surely a factor behind decline of the local currency against the U. S. dollar, many analysts are of the view that the central bank is also buying dollars in to increase its foreign exchange (forex) reserves.

Commenting on the situation, Greenback Forex Services director Subramaniam Sharma said, "The central bank is suspected to have been buying dollars in recent sessions to shore up its foreign exchange reserves."

Many other Asian currencies, including peso, yuan and baht, are also trading weaker compared with the U. S. dollar.

The Indian currency jumped to its highest level in around eight month in March, hurting export-oriented sectors such as information technology (IT). It may be noted here that a weaker rupee makes exports more profitable, while importers becomes dearer.

Market observers believe that the rupee could appreciate to 57-58 in the near-term, thanks to increasing inflows of foreign funds in the form of investments in various projects.