The rupee made a sharp recovery after touching a record low of 74.50 a dollar in early trade following intervention and assurance of liquidity by the Reserve Bank of India.
The rupee opened weak at 74.39 a dollar compared with the previous close of 74.24 and then touched the day’s low of 74.50. The previous record low was on October 9, 2018 when the rupee closed the day at 74.39 a dollar.
On Friday, the rupee closed the day at 73.80 a dollar, up 44 paisa from its previous close.
The turbulence in the financial market steered the central bank into making a statement, saying it would take steps to ensure adequate liquidity and that the situation was being monitored closely.
Markets around the globe are facing volatility due to risk aversion; investors are holding liquidity even as COVID-19 keeps spreading. Trading was halted in the domestic equities market after hitting their lower circuits on Friday.
“The Reserve Bank of India is closely and continuously monitoring the rapidly evolving global situation and will take all necessary measures to ensure that money, debt and forex markets remain adequately liquid and stable, and continue to function normally,” the RBI said.
On Thursday, the RBI announced that it would open a six-month dollar sell-buy swap window to pump in liquidity in the foreign exchange market. The central bank will conduct U.S. dollar-rupee sell-buy swaps worth $2 billion on March 16, to ‘begin with,’ in its effort to fight market volatility.
The central bank observed mismatches in the U.S. dollar liquidity had become accentuated across the world but added that the level of foreign exchange reserves remained at comfortable levels to meet any exigency. Latest data released by the RBI showed the country’s foreign exchange surged $5.69 billion to reach an all-time high of $487.23 billion in the week to March 6 due to an increase in foreign currency assets.
