The effect of increasing tension in the Middle East is now visible on the Indian economy as well. On Monday, the rupee weakened against the dollar and crossed the level of 95 intraday. Although at the end of trading it closed with some strength at 94.78, but the volatility and concern of investors was clearly visible in the market. In such a situation, the question now arises that what steps will the Reserve Bank take to manage the rupee?
Demand for dollars has increased due to Iran war and global uncertainty. Whenever fear increases in the international market, investors turn to the dollar as a safe option. For this reason, there is pressure on the rupee and continuous fluctuations are being seen in it.
What is the big suggestion in SBI report?
An important advice has been given to RBI in the research report of State Bank of India (SBI). According to the report, India has foreign exchange reserves of more than $700 billion, which is enough to cover 10 months of imports. SBI says that RBI should not keep these reserves only for difficult times, but should support the rupee by intervening in the market when needed.
Suggestion of separate system for oil companies
The report also said that a separate window should be created for Oil Marketing Companies (OMCs). With this, their daily dollar demand can be separated from the market. This will clarify the picture of real demand and supply and the volatility of the rupee can be controlled in a better way.
Impact of RBI’s recent decision
Recently RBI has fixed the Net Open Position (NOP) limit for banks at $100 million. According to the report, this may increase the gap between onshore and offshore markets and create pressure on liquidity. Experts believe that if the global situation remains the same, the rupee may continue to fluctuate. In such a situation, it will be very important for RBI to take right steps at the right time.