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RBI governor sees $56-bn CAD, won’t rush to taper oil $ swap window

‘Our estimates now is that CAD this year will be $56 billion, less than 3 per cent of GDP and $32 billion less than last year.... Of course, some of that compression comes of our strong measures to curb gold import,’ RBI governor Raghuram Rajan said at a hurriedly called press conference.

Earlier, the government had projected the CAD in the current fiscal at $70 billion, which was revised downwards to $60 billion by Finance Minister P Chidambaram on back of declining gold imports and recovery in exports.

Rajan further said RBI was weighing various options to contain exchange rate volatility and would come out with 'appropriate' steps in the future.  Rajan also said the central bank would undertake open market operations (OMO) on Monday to inject Rs 8,000 crore into the system to ease the liquidity situation.
As part of the OMO, the central bank buys securities from banks and release funds in the process.

On interest rates, he said, the RBI would take a decision later taking into account various parameters. The RBI is scheduled to announce the next policy review on 18 December. He expressed the hope that inflation would decline in the coming months once the impact of the good harvest was felt on the market.

Elaborating on exchange rate issues, Rajan said that majority of dollar purchase by oil companies have been shifted to the market.

In order to check rupee slide, the Reserve Bank in August had opened a special window to help the three state-owned oil marketing companies to meet daily foreign exchange requirements and buy dollars
directly from RBI. The PSU oil companies are the biggest buyers of dollars, requiring 8-8.5 billion dollars every month for import of an average 7.5 million tonnes of crude oil. The rupee, it may be mentioned, fell to a record low of 68.85 to the dollar on August 28 and recovered on the optimism that the Fed would delay tapering its bond buying programme.
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