Indian Thought Latest News & Views
According to a report by the State Bank of India (SBI), the Indian rupee may see a strong recovery once the current market uncertainties end. The report said that the dollar index (DXY) still has some momentum left, but SBI said that the rupee may bounce back strongly after a period of volatility similar to that period, citing analogy with the 2016-2017 period
The report explained- where is the dollar getting stronger from?
The dollar index (DXY) is an index of the value of the dollar relative to a basket of foreign currencies. The report highlights that the dollar index may continue its upward movement due to several factors. This also includes the reversal of global financial flows on the dollar. The dominance of “big tech” companies supporting economic growth-supporting policies such as Donald Trump’s “Make America Great Again” campaign contributes to the strength of the dollar. SBI reported that India’s currency in circulation (CIC) has increased by Rs 78,000 crore in the current financial year, reaching about Rs 35.9 lakh crore, which is about 11 percent of the country’s GDP. In addition, the Reserve Bank of India (RBI) has actively intervened in the foreign exchange market by selling Rs 1.7 lakh crore in the forex market to hold the rupee till November 2024.
According to SBI, the worst phase of rupee is going to end soon
“Net sales of foreign exchange by RBI as on November 24 was Rs 1.7 lakh crore and we believe it would have easily crossed the Rs 1.7 lakh crore mark at least till date, given the depreciation in the rupee,” the SBI report said. SBI believes the worst may be over soon. The rupee is expected to recover in value once global economic uncertainties subside and market conditions stabilise. This outlook is a ray of hope for India’s currency, which has been facing a challenging macroeconomic environment in recent times.
RBI may amend liquidity management framework: SBI
According to a report by the State Bank of India (SBI), the Reserve Bank of India (RBI) may announce significant changes to its liquidity management framework (LMF). These adjustments may include daily variable rate repo (VRR) auctions as a first step. Also, innovative measures may be included to balance liquidity requirements and strengthen the banking system. SBI said, “Further changes in RBI liquidity management framework likely… Daily VRR first step… Such changes and next round of initiatives are smart and pragmatic by RBI… A delicate mix of temporary and permanent liquidity injections/withdrawals is still a work in progress.”
