RTTN:Indian Rupee At 2-week High Versus U.S. Dollar On RBI Tightening
The Indian rupee strengthened against the U.S. dollar in morning deals on Tuesday, as the Reserve Bank of India took measures to restore stability in the foreign exchange market by tightening liquidity conditions.
The central bank on Monday raised lending rate as well as Marginal Standing Facility rate to 10.25 percent with immediate effect.
The overall allocation of funds under the Liquidity Adjustment Facility will be limited to 1.0 per cent of the Net Demand and Time Liabilities of the banking system, or Rs.75,000 crore. This will be effective from July 17.
Further, the bank will conduct sale of Government of India Securities of Rs.12,000 crore on July 18, a move that would suck up cash from the system.
The Indian rupee climbed to 59.195 against the buck, its highest level in 2 weeks. Further bullish extension of the rupee may see it testing resistance around the 58.6 area. The pair closed Tuesday's deals at 59.90.
The rupee had collapsed since May on large capital outflows triggered by concerns of possible unwinding of US quantitative easing program.
Falling rupee has been a matter of concern for India, which is already burdened with huge current account deficit. On last week, the rupee had crossed the key 61.2 level, a record low.
