RBI eyes all options: Analysts

According to Singapore-based DBS Bank, tapping foreign exchange reserves will be the first line of defence, which is already underway.

Update: 2018-09-13 00:30 GMT
The Reserve Bank on Thursday lowered retail inflation target for the first half of current fiscal to 4.7-5.1 per cent on sharp moderation in food price rise and likelihood of a normal monsoon.

MUMBAI: With the rupee remaining under pressure amidst a sell-off in emerging market risk assets, market participants are expecting a host of rate and non-rate measures from the Reserve Bank (RBI) and the government in the coming days. 

According to Singapore-based DBS Bank, tapping foreign exchange reserves will be the first line of defence, which is already underway. 

Rate hikes will be the next recourse, which is a prudent policy move but has not been most effective in arresting a weakening rupee. Thereafter, it said liquidity tightening could be accompanied by specific measures like higher returns on NRI deposits or fresh bond issuances. 

“The markets are beginning to price in a possible scheme to raise NRI funds. The proposed size could also be in the range of $30-40 billion taking the past scale as a gauge,” DBS Bank said. 

Analysts at BoAML too believe that issuing NRI bonds are more effective. It expects the ministry of finance and RBI to raise NRI bonds worth $30-$35 billion if rupee persists above 70 level mark into the December quarter.  

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