Rupee gains lag Asian peers as RBI builds buffer
policy environment in 2024 have boosted most Asian currencies versus the dollar, but the rupee's gains have paled in comparison as the Indian central bank looks to build a reserves buffer and preserve export competitiveness amid a global scarcity of the greenback.
On Thursday, the rupee closed at 83.3275 per US dollar, just 0.09% stronger than 83.4025/$1 at previous close. Meanwhile, currencies such as the Thai baht and the South Korean won notched up gains of around 2% versus the US dollar on Thursday while the Indonesian rupiah strengthened 1%, Bloomberg data showed.
The Malaysian ringgit, the Taiwanese dollar, the Chinese yuan, the Philippine peso, and the Singapore dollar also outstripped the rupee's gains on Thursday, with the domestic currency extending the underperformance it showed versus its Asian peers last month.
In November, the rupee shed 0.17% versus the dollar while eleven other Asian currencies appreciated, the data showed.
The rupee's lacklustre performance comes despite strong overseas portfolio investment flows into Indian capital over the past couple of months, with analysts saying that the Reserve Bank of India would have looked to absorb the flows and build up its buffer of reserves in an uncertain global environment.
«We track flows very carefully and the rupee's action has not been determined by market flows. It is more to do with the central bank.
At this level, it believes that it needs to replenish reserves. One of the factors is that the quality of reserves has deteriorated,» said HDFC Bank's chief economist Abheek Barua.
«Most of the reserve build-up has been on the back of portfolio flows.
FDI has been very sparse. So, I think the RBI possibly wants to keep its reserve chest buffered
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