Governor's statement boosts rupee, closes 46p up at 95.23/$

MUMBAI: The rupee gained paise to close at 95.23 against the dollar up 46 paise from its previous close of 95.69 following statements from the RBI governor in support of the currency combining with a softening of crude oil prices in the international market on hopes of an Iran-US truce.

"The rupee has strengthened, and the credit goes to the RBI for some strong statements made-the most significant being that the rupee may actually be undervalued rather than overvalued due to this successive depreciation witnessed of late. This along with the assurance given on intervention if required has cooled the markets on Monday morning along with of course the price of crude coming down," said Madan Sabnavis, chief economist, Bank of Baroda.

"With the recent depreciation, it would be reasonable to think that the rupee is not overvalued. If anything one could argue that the rupee has become undervalued, both in nominal as well as in REER (real effective exchange rate) terms," RBI governor Sanjay Malhotra told a publication.

The governor also said that there was no undue concern on the balance of payment front which called for concerted efforts by the govt, RBI and all institutions concerned.

The governor also said that in order to ensure that exchange rate adjustments are orderly and not disruptive of economic activity, the RBI will use all instruments to ensure smooth exchange rate adjustment that reinforces financial stability. He added that intervention is also acknowledged as a legitimate tool by the IMF.

The rupee gained 173 paise after touching a low of 96.96/$ last week. Dealers expect further gains should a peace deal be signed and oil prices dip further. According to Jateen Trivediof LKP Securities, uncertainty remains elevated as Us President Donald Trump said the Hormuz blockade would continue until a final agreement is formally signed.

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