Value of Rupee Stabilizes, RBI Largely Expected to Tighten Policies
All throughout Wednesday, the value of the Indian rupee was largely unchanged; post a sharp decline in late trading which happened on the previous day on the back of China's move to hike banks' reserve requirements, which fueled concerns over the outlook for economic growth.
At about 9:18 AM, the rupee was trading at 45.70/71 for a US Dollar, almost stable at its last closing value of 45.71/72. On Monday, the currency had surged to 45.2850, which was its strongest value recorded since September 22, 2008.
On Tuesday, China had lifted its reserve requirement ratio, which is the proportion of deposits that banks much keep in reserve, by 0.5%. Dealers have now speculated that tighter monetary rules across China could hamper the country's economic growth, which could have an effect on related world economies as well.
"The rupee dropped yesterday following China's reserve requirement ratio hike. There is an expectation that the Reserve Bank of India may follow and hike CRR and also the reverse repo", said Ashtosh Raina, head of foreign exchange trading at Yes Bank.
