Rupee vs Dollar: A big relief news has come from the Indian currency market. Facing constant pressure against the US dollar, the rupee has made a brilliant comeback. This is the second day in a row that the Indian currency is doing strong business. As soon as the market opened, the rupee saw a huge jump of 62 paise. After this it reached the level of 95.16 per dollar. The dollar was priced at Rs 95.78 when the market closed on Monday. The reason behind this spectacular recovery is the recent tightening decisions by the Reserve Bank of India (RBI).

Direct impact on importers

This strengthening of the rupee is having a mixed effect on the market. According to a report by financial advisory firm Finrex, the market is now becoming very cautious in buying dollars. Small traders got a big relief as the rupee closed at a one-month high. They are now finding it easier to buy dollars to make their foreign payments. On the other hand, the challenge has increased for large importers. To protect their position, they have to pay additional charges in the form of FERR to the banks.

Strong preparations to stop betting

According to a report by news agency PTI, foreign exchange experts said that some special strategies are at work behind this strength. Oil marketing companies have been separately facilitated for dollars. The cost of transactions related to foreign exchange hedging has also been increased. Due to these measures, the demand for dollars in the spot market has decreased. The biggest advantage is that betting against the rupee has been curbed to a large extent. As a result, the rupee touched 94.96 at one point after opening at 95.53 in the interbank forex market. This was a huge increase of 82 paise over the previous closing price.

Poor condition of Asian currencies

On one hand, the Indian rupee is strengthening, while the currencies of other Asian countries have been underperforming. Most Asian currencies have depreciated against the US dollar. The biggest loser was the South Korean won, which lost 0.214 percent. The Taiwan dollar also fell 0.175 percent. Apart from this, the Philippine peso, Indonesian rupiah, Thai baht, Chinese renminbi and Malaysian ringgit saw slight declines. However, the Japanese yen gained 0.152 percent, while the Singapore dollar remained unchanged. During the period, the dollar index, which measures the dollar’s strength against six major world currencies, was trading down 0.15 percent at 102.43.

The impact of RBI’s action is visible

The Reserve Bank on Saturday made several important announcements to protect the rupee from falling. The central bank has made the rules for forex derivatives trade very strict. Banks are clearly instructed that they have to reserve 20 percent on purchases above $2 million. Apart from this, another strict rule has been implemented. Authorized Dealers will no longer be allowed to rebook any foreign currency derivative contracts (whether deliverable or non-deliverable) related to the Indian Rupee to customers that have been canceled earlier. All these decisions together have given the rupee a strong security shield.