The Indian rupee gained ground against the U.S. dollar on Thursday, as the Reserve Bank of India announced that it would sell dollars to oil firms through a special window, as part of its latest attempt to prop up the currency.
In a notification released on Wednesday, the central announced the opening of forex swap window to meet the entire daily dollar requirements of three public sector oil marketing companies, namely IOC, HPCL and BPCL.
The central bank "will undertake sell/buy USD-INR forex swaps for fixed tenor with the oil marketing companies through a designated bank," it said. The notification is with immediate effect and remains until further notice. Snapping its losing streak, the rupee strengthened 3.5 percent to 66.85 against the greenback from a record low of 69.235 touched on Wednesday. If the rupee continues its bullish pattern, the next upside target lies around 66.00 area.
The rupee declined below the 69.00 mark on Wednesday, hurt by escalating tensions in Syria that sent crude prices higher. India is importing nearly 80% of its oil requirements and a surge in prices would widen its fiscal deficit.
The rupee has been seeing a setback in recent months following the U.S. Federal Reserve decision to scale back its asset purchase program that triggered huge outflows from the emerging markets.
The Indian central bank took several efforts to rejuvenate the rupee, relaxing rules pertaining to the statutory liquidity ratio requirements for banks, increasing duty on gold imports and putting restrictions on outflows.
In July, the RBI raised the bank rate and the marginal standing facility and curbed overall allocation of funds under the Liquidity Adjustment Facility and enhanced bank's cash reserve ratio requirements to counter the volatility in the foreign exchange market.
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