New RBI steps to aid rupee.
India's central bank announced new measures on Thursday to drain cash from the financial system in a bid to address volatility in currency markets, after a slew of steps announced last month failed to prop up the battered rupee.
The Reserve Bank of India, or RBI, will auction Rs220 billion ($3.59 billion) of government cash management bills every Monday, it said in a statement, without specifying for how many weeks the sales would last.
The measures come after the RBI unveiled measures on July 15, including raising short-term interest rates, in a bid to drain cash from the financial system, and followed up with additional steps on July 23. However, those steps failed to prop up the rupee , which has fallen 1.6 per cent since the initial measures were announced mid-month and hit a record low of 61.80 on Tuesday.
The latest additional cash-draining steps were announced amid investor expectations for government measures to attract foreign inflows in a bid to help narrow a record high current account deficit, which has been the key source of stress on the rupee. Expectations a package will be announced over the weekend pushed the rupee on Thursday to its biggest single-day gain in two weeks. It closed at 60.88/89 per dollar, compared with 61.30/31 on Wednesday.
"There was some hope in the market that the previous measures would be reversed in some time and that is why there was a rally in the bond market. But [Thursday's] measures signal that there is still some more time to go before any reversal," said Ashish Parthasarthy, head treasurer at HDFC Bank. --
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