InvestorQ : Where do you see the rupee in coming months and do you see RBI supporting the INR?
Riya Dwivedi made post

Where do you see the rupee in coming months and do you see RBI supporting the INR?

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shrinidhi Rajan answered.
2 months ago
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Let me answer your question on INR outlook first. If you go by currency futures data, rupee shows a worst case scenario of Rs79/$ by end of 2022. However, these can change at short notice. For instance, if RBI falls behind the Fed in terms of rate hawkishness, there could be a sharp dip in the rupee. FPI flows will be critical and in the past they tend to re-enter Indian markets after any 7-10% dip in the rupee to capitalize on the arbitrage. That is a positive.

Let me address the issue of RBI supporting the rupee. Typically, RBI sells dollars to support the rupee and that is something it has been consistently doing for last few months. In the process, forex reserves depleted by $52 billion from $647 billion to $595 billion. Clearly, RBI cannot be too cavalier with interventions at this rate. Going ahead, RBI is likely to intervene if there is systemic risk. After all, weak rupee is an automatic exports booster.

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