Friday 2 December 2022
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EconomyRupee recovers remarkably

Rupee recovers remarkably

The Indian rupee climbed in value remarkably today, marking the second straight day of gains after a free fall earlier this week, as the Reserve Bank of India (RBI) raised interest rates on expected lines. The upward rise of the rupee owes also to the calming of the markets, with the dollar pulling back from multi-year highs. 

The rupee gained 38 paise to provisionally close at 81.35 against the US dollar. The Indian is changing hands at 81.40 per dollar, well below its record low of 81.95, after opening at 81.57 and compared to its previous close of 81.86 against the greenback.

The trading range of 81.1525 to 81.6950 showed the rupee was well higher than its record low levels, ending a disturbed week on a positive note. A surge in domestic equity benchmarks vouches for that.

The RBI hiked its key lending rate by 0.5% to a three-year high of 5.90%, reassured of policy action to do whatever it takes to rein in inflation while lowering growth forecasts for this year.

RBI Shaktikanta Das said the rupee's decline was orderly and that the domestic while having fallen, had held its ground better than major peers, driven largely by a surging dollar, which was up more than 16% for the year.

Following a week of turbulence, recession worries drained stocks, and the dollar surge rocked markets; currency markets calmed on Friday, with the greenback flat after hitting a 20-year high the day before yesterday.

Following efforts by the Bank of England (BoE), helping calm markets, the British pound-sterling, which had fallen to a record low of $ 1.0350 on the first working day of the week due to a combination of dollar strength and the government's plans for tax cuts financed by borrowing, was up 0.6% on the day at $ 1.119. Yet, it was on track for its worst quarter versus the dollar since 2008. "We are closer to bottoms, and the sentiment is so negative the downside is becoming more limited," Esty Dwek, chief investment officer at Flowbank SA, said. "At some point, risk assets will move higher again."

Nevertheless, the mood remains tense as traders try to predict the next pressure points that might reverse the gains made by the BoE's massive bond purchases over the last two days.

The rupee still has to recover from the biggest all-time fall against the dollar

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