The rupee could be on edge when it opens for trading on Monday because Raghuram Rajan is exiting at a time when the economy will be up against a number of challenges including maturing FCNR(B) deposits, aggregating about $20 billion, beginning September 2016, UK’s possible exit from the European Union and expectation of two rate hikes by the US Fed this year.
“I expect the rupee to open in the 67.40-67.50 range, against the previous close of 67.08 to the dollar. If there is no intervention, we could see intra-day levels of 67.60-67.65 levels also. But I feel heavy intervention will be there,” said a senior forex dealer with a public sector bank.
When Raghuram Rajan took charge as RBI Governor on September 4, 2013, the rupee appreciated 55 paise due to a slew of measures announced to improve capital inflows. This pullback happened after the rupee had plunged by a whopping ₹2.56 on August 28, 2013, to close at 68.80 to the dollar, an all-time low.
As he gets ready to pack his bags in about two months, the rupee appears to have come full circle. Consider this: On September 4, 2013, when Rajan took the reins at RBI, it strengthened to close at 67.10, against the previous close of 67.65 to the dollar. Last Friday (June 17, 2016), the domestic unit closed at 67.08 to the dollar.
“The financial markets will definitely react. There will be gap-up opening (in the forex market). All the markets will react, whether it is bonds, forex or equity. But more reaction may be there on the forex side,” said another forex dealer.
In the nearly three years that Rajan has been at the helm of THE RBI, India’s foreign exchange reserves have been bolstered by about $88 billion to $363.233 billion as on June 10, 2016.