As the US-led foreign institutional investors (FIIs) continued their war against the rupee on Wednesday, pushing it below the 68-mark for the first time in history, the American private rating agencies — which were thoroughly discredited during the 2008 US-led global financial crisis — zeroed in for the kill. They warned the government that the Indian economy’s prospects were ‘rocky’, a euphemism for a threat to downgrade the country’s sovereign debt rating and outlook.
The Mamnohan Singh government, on its part, sought to reassure international investors by saying that there was no need for panic as the decline in the domestic currency was a reflection of ‘irrational sentiment’. ‘There is no need to panic. The Indian economy is strong and we will turn it around,’ said Commerce and Industry Minister Anand Sharma. While the rupee fell by 256 paise to close at a record low of 68.80 to the dollar on Wednesday, US-based private rating agency Standard & Poor’s (S&P) cautioned that the road ahead for India is ‘rocky in the near term’.
Reflecting the uncertainty in the economy, gold prices jumped by a record Rs 2,500 to Rs 34,500 per 10 grams.
However, in a silver lining to the overall gloomy market sentiment, the Bombay Stock Exchange’s (BSE) benchmark 30-share S&P Sensex ended up by 28 points at 17,996.15, shrugging off the negative global as well as domestic factors. On Tuesday the Sensex had plunged by 590 points. The rupee dropped as oil prices rose in Asian trade on concerns over a possible US-led military attack against Syria, adding to concerns about the current account deficit (CAD) and capital outflows.
Meanwhile, the RBI, the country’s central bank, opened a special window on Wednesday to help the three state-owned oil marketing companies (OMCs) IndianOil, HPCL and BPCL in a bid to check the rupee’s free fall. ‘On the basis of assessment of current market conditions, the RBI has decided to open a forex swap window to meet the entire daily dollar requirements of the three public sector oil marketing companies,’ the central bank said in a statement.
These three PSU oil companies are the biggest buyers of dollars, requiring $8-8.5 billion every month for the import of an average 7.5 million tonnes of crude oil. The RBI decision is aimed at curbing volatility in the forex market. The RBI will ‘sell/ buy dollar-rupee forex swaps for a fixed tenor with the OMCs through a designated bank.... It gets operationalised with immediate effect and will remain in place until further notice’, the RBI said. During April-July, oil imports were valued at $54.6 billion, which was 2.65 per cent higher than $53.2 billion in the corresponding period last year.
The Mamnohan Singh government, on its part, sought to reassure international investors by saying that there was no need for panic as the decline in the domestic currency was a reflection of ‘irrational sentiment’. ‘There is no need to panic. The Indian economy is strong and we will turn it around,’ said Commerce and Industry Minister Anand Sharma. While the rupee fell by 256 paise to close at a record low of 68.80 to the dollar on Wednesday, US-based private rating agency Standard & Poor’s (S&P) cautioned that the road ahead for India is ‘rocky in the near term’.
Reflecting the uncertainty in the economy, gold prices jumped by a record Rs 2,500 to Rs 34,500 per 10 grams.
However, in a silver lining to the overall gloomy market sentiment, the Bombay Stock Exchange’s (BSE) benchmark 30-share S&P Sensex ended up by 28 points at 17,996.15, shrugging off the negative global as well as domestic factors. On Tuesday the Sensex had plunged by 590 points. The rupee dropped as oil prices rose in Asian trade on concerns over a possible US-led military attack against Syria, adding to concerns about the current account deficit (CAD) and capital outflows.
Meanwhile, the RBI, the country’s central bank, opened a special window on Wednesday to help the three state-owned oil marketing companies (OMCs) IndianOil, HPCL and BPCL in a bid to check the rupee’s free fall. ‘On the basis of assessment of current market conditions, the RBI has decided to open a forex swap window to meet the entire daily dollar requirements of the three public sector oil marketing companies,’ the central bank said in a statement.
These three PSU oil companies are the biggest buyers of dollars, requiring $8-8.5 billion every month for the import of an average 7.5 million tonnes of crude oil. The RBI decision is aimed at curbing volatility in the forex market. The RBI will ‘sell/ buy dollar-rupee forex swaps for a fixed tenor with the OMCs through a designated bank.... It gets operationalised with immediate effect and will remain in place until further notice’, the RBI said. During April-July, oil imports were valued at $54.6 billion, which was 2.65 per cent higher than $53.2 billion in the corresponding period last year.