India's state-run oil companies have started buying 30-40 per cent of their dollar demand in markets instead of the special window provided by the Reserve Bank of India (RBI), television channels reported on Thursday, quoting economic affairs secretary Arvind Mayaram.
A return to sourcing some of their dollar needs from spot markets would mark a wind down of a key emergency measure imposed by the RBI in late August, when the rupee was tumbling to record lows against the dollar.
The RBI then directed India's three state-run oil companies to source dollars directly from a special window provided by the central bank in a bid to ease selling pressure on the local currency.
Oil companies are the biggest buyers of dollars in markets, averaging around $300-350 million a day, according to traders' estimates.
Neither TV channel showed Mayaram's full remarks.
Although the move helped the rupee recover from a record low of 68.85 in late August, it has weighed in the near term on India's currency reserves of $283 billion, which are enough to cover only seven months of imports.
Under the swap window, oil companies were buying dollars through forward contracts from the central bank at market-determined rates with a promise to pay back those dollars to the RBI.
The window would have had to end sometime in November given the RBI was offering a 3-month dollar swap facility to the oil refiners, one official with direct knowledge of the arrangements told Reuters.
Still, few analysts expect the rupee to slump should the RBI close its dollar window completely, given that the Federal Reserve's delay of its planned withdrawal of monetary stimulus has sparked a rally in Indian markets.
Foreign institutional investors have bought nearly $4 billion in domestic shares since the Fed announced the delay in mid-September, pushing the BSE sensex to a record high last week.
Banks in India have also raised $15.1 billion in loans and funds from citizens abroad ever since the RBI started subsidising some of the exchange costs.
The rupee is expected to stabilize in 1-2 days as state-run oil dollar demand gets absorbed by markets, television channel CNBC-TV18 also quoted Mayaram as saying.
Bank of America-Merrill Lynch had advocated the RBI close the window, arguing it had already been factored into markets.
"We believe the time is right for RBI to start tapering its swaps with oil companies to fund oil imports as the markets are already pricing these in," the US investment bank said in a report on Tuesday.
"It is scarcely possible to fund net oil imports averaging $8-10 billion a month with FX reserves of about $280 billion."
The rupee was trading at 62.58 late on Thursday, weaker than its previous close of 62.39/40.
It has rebounded around 10.3 per cent since hitting a record low of 68.85 on August 28.
Still, a Reuters poll on Thursday showed it will likely struggle to recover any more ground over the next 12 months due to uncertainty around upcoming elections, the country's external deficit and the impact of the possible tapering in the Federal Reserve's stimulus programme.
Source:- timesofindia.indiatimes.com
No comments:
Post a Comment