RTTN:Indian Rupee Strengthens Against Dollar After RBI Move
(RTTNews) - The Indian rupee strengthened against the U.S. dollar on Thursday morning after the Reserve Bank of India announced that all foreign-exchange earners, including exporters, have to convert 50 percent of their dollars held in Exchange Earner's Foreign Currency, or EEFC, accounts into rupee.
The central bank also noted that this process must be done within a fortnight.
In respect of all future forex earnings, the central bank said that an exchange earner is eligible to retain only 50 percent of their earnings in non-interest bearing Exchange Earners' Foreign Currency, or EEFC, accounts and the balance 50 percent should be surrendered for conversion to rupee balances.
In a separate release, the RBI has also asked banks to restrict their net intra-day open positions in order to further stem speculation in the markets.
The central bank now set the intra-day open position limit for the banks at five times the Net Overnight Open Position Limit available to them or the existing Intra-day open position limit as approved by the Reserve Bank, whichever is higher. This limit will be applicable for positions involving rupee as one of the currencies.
The central bank move came as an effort to support the rupee, which has declined more than 11 percent thus far from a 3-month high of 48.570 hit in early February. The rupee's slide in recent months was due to debt worries in the Eurozone and India's foreign capital outflows because of uncertainty over domestic tax regulations.
The rupee fell to as low as 53.9202 against the dollar yesterday, which is almost near a record low of 54.305 hit in December last year.
But the rupee rose to 52.9450 per dollar amid the RBI move this morning, up 1.6 percent from Wednesday's close of 53.8150. If the Indian currency gains further, it may likely target the 52.0 level.
