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Live news , top stories, corporate news, company news, sector news, economy news, results analysis news, ceo interviews, fund manager interview, advisor interview, market news, bazaar talk, hot stocks news, ipo news, commodities news, mutual fund news, insurance news, news wire
07 July, 2025 12:19 IST
Rupee stays firm on real terms: DBS Bank
Source: IRIS | 26 Nov, 2014, 10.54AM
Rating: NAN / 5 stars.
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The rupee is down more than 3% against the USD since June, hovering within the 61.80-62 range after briefly testing past the latter last week. While the rupee bilateral rate signals a slight depreciating bias, the real effective ex­change rate (REER) is pointing the other way, according to DBS Bank, India.

''On inflation-adjusted REER basis, the rupee has in fact appreciated more than 2% since June. Plainly put, even though rupee is weak against the dollar, it is trading on a firm note against the currencies of its key trading partners ,'' it added.

''This divergence in the currency movements can be partly explained by composi­tion of the effective exchange index, as the impact of the strong USD is offset by the weak Euro and JPY. With the central banks in the latter two expected to keep their feet on the stimulus pedal, downside pressure on their respective cur­rencies could sustain and keep the rupee firm on comparative basis,'' said DBS Bank.

Thereby, to compensate for the currency's strength on real basis, build foreign reserves stock and ensure trade competitiveness, the Reserve Bank of India (RBI) is likely to keep the rupee on a tight leash. Intervention data also points to the central bank's active presence in supporting the USDINR. After turning as a net seller in Aug, RBI bought net USD 1.4 billion in spot and USD 8.4 billion in the forwards market in Sep. This likely lasted into Oct and Nov to offset broad USD strength.

''Despite the recent bout of rupee weakness against the dollar, the unit is still amongst the strong performers in the region. The economy's current account deficit is likely to stay below -2% of GDP this year, well within RBI's comfort level of -2.5%. On the other hand, strong portfolio inflows (equity and debt) and re­covery in FDI flows will buttress the capital account and be more than sufficient to fund the current account gap, boosting the bal­ance of payments posi­tion,'' it said.

''In sum, the economy's improving macro fun­damentals, buoyant sentiments and FX re­serves stock will help shied the currency from any intermittent bouts of risk aversion. But any unexpected flare-up in global risk factors could put the India's re­silience at test.''

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.

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