The Indian rupee is likely to get some reprieve this week as the Reserve Bank will be sucking more money out of the system beginning this Monday and the government promising more steps to woo foreign inflows to help partly fill the large current account gap.
The rupee is expected to inch up to 60 or even higher against the dollar this week, said many treasury officials.
"The rupee will be appreciating after the new measures (to sell Rs 22,000 crore worth of cash management bills every Monday) announced by the Reserve Bank," Jayesh Mehta, managing director and country treasurer for global markets group at Bank of America-Merrill Lynch told PTI.
Echoing similar sentiment, a StanChart treasury official said the proposed government measures as well the latest RBI steps will send in a strong signal to the market, which will help prop the battered rupee.
"The runaway depreciation of rupee will not be seen as the government and RBI are committed. The rupee seems to stable this week with market looking at the additional measures," Ananth Narayan, head for fixed income, currencies and commodities at StanChart South Asia told PTI.
In its recent round of measures to curb volatility in foreign exchange market and salvage the battered rupee, the central bank had last Thursday said it would sell Rs 22,000 crore worth of cash management bills (CMBs) every Monday.
"The measure signals that liquidity will be going out of the system. So, the people who have long positions on the dollar are going to take a hit. We will see some dollar selling this week," Navin Raghuvanshi, vice president for treasury at Development Credit Bank said, adding that the rupee is likely to trade in the 59.50-60.50 range this week.
Since mid-July, the RBI has announced a slew of liquidity tightening measures to curb the fall of the rupee, which is the worst hit Asian unit.
On July 15, the RBI had raised short-term borrowing rates and limited banks access to liquidity by way of restricting borrowing from repo window to Rs 75,000 crore.
It had also sold government securities though open market operations since July 18. On July 23, the central bank had directed banks to draw only 50 per cent of their total deposits in overnight borrowings and maintain a 99 per cent average cash reserve ratio on a daily basis.
Market participants are optimistic on the rupee as they expect the government to unveil more steps this