Rupee rises to 67 per dollar level on RBI steps

The rupee trades at 66.95 per dollar, up 1.18% from Tuesday’s close of 67.73

Mumbai: The Indian rupee recouped all its losses to rise against the dollar on Wednesday after the Reserve Bank of India (RBI) clarified that Indian firms investing abroad can do so up to 400% of their networth by way of external commercial borrowings (ECBs).

Residents can also make remittances to fund studies up to the estimates from institutions abroad, or $100,000, whichever is higher, over and above the remittance limit of $75,000, RBI said.

Positive sentiment in the stock market also helped the rupee as it raised expectations of investment by foreign institutional investors (FIIs).

At 1:45pm, the rupee was trading at 66.95 per dollar, up 1.18% from Tuesday’s close of 67.73. It had earlier opened weak and touched an intra-day low of 68.62, which was close to its all-time low of 68.85 per dollar touched on 28 August.

Harihar Krishnamoorthy, treasurer at FirstRand Bank Ltd, said RBI’s clarification has soothed the market. “It gives out a clear message that India is not looking at capital controls. Restrictions on borrowings of Indian companies did not impact large companies but hit medium-sized ones,” Krishnamoorthy said.

RBI also said that companies, for funding of overseas direct investments through ECBs, can also borrow 400% of their networth.

“This measure had been taken in the context of current macroeconomic situation. It was not the intention of the Reserve Bank of India to restrict bona-fide and genuine overseas direct investment transactions by Indian companies,” RBI said.

Krishnamoorthy said RBI measures had reduced tensions in the market. The domestic 30-share benchmark Sensex was up 1.01% to 18,414.46, while the 10-year bond yield fell 13 basis points (bps) to 8.45% from Tuesday’s close of 8.58%. One basis point is 0.01 percentage point.

On Tuseday, the US Senate approved use of force against Syria in a “limited and tailored manner against legitimate military targets” during a 60-day period following enactment, with a possible 30-day extension at US President Barack Obama’s request. It does not allow for US troops to enter Syria on the ground.

Krishnamoorthy said the limited approval was positive because its will restrict the US invention from becoming a “full-fledged war.”

“The market seems to have stabilized today (on Wednesday) and the rupee could end above 67 per dollar,” Krishnamoorthy said.

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