Britain's leaving the European Union sent tremors in the forex market as the rupee shriveled by close to a 96 paise – the biggest one-day loss since August 28, 2013.
The week that began with Rexit ended with Brexit.
Britain's leaving the European Union sent tremors in the forex market as the rupee shriveled by close to a 96 paise – the biggest one-day loss since August 28, 2013.
But a strong intervention by the Reserve Bank of India (RBI) pulled back the losses. Forex dealers say that RBI may have sold close to $1.5 billion in the single day trade alone, helping the rupee pull back its losses as it closed 72 paise down at Rs 67.97 to the dollar.
Raghuram Rajan, governor of RBI, was swift to assuage the markets. He said in a concall from Brussels where the central bankers are meeting, "Rupee has been relatively well behaved compared to the other currencies. We have not seen the 6-7% change in our currency compared to the Mexican peso, for example. If there are disruptions in the markets and liquidity is not available from certain quarters, we are fully ready to provide whatever liquidity is needed, both dollar liquidity as well as rupee liquidity."
"India should not see any major foreign selling given its relatively better fundamentals in comparison to other economies," Rajan added.
Experts say the disintegration of the EU will have ramifications on global trade all over the world.
Jamal Mecklai, currency expert, and chief executive officer, Mecklai Financial Services, told dna, "First, we had the Rexit, then now the Brexit and top of this, we have Trump, we have the FCNR deposits maturing in November.
So the uncertainty will continue and keep the pressure on the rupee. Governor Rajan leaving in September will also create some instability. Cannot predict the level of the currency but the pressure will be on the currency for sure for a prolonged period of time."
Forex dealers said, "Large public sector banks asked to stand by for any eventuality and many of the big banks were selling in the market. RBI would have sold close to $1.5 billion."
JP Morgan said in a report that the growth in the Eurozone will be dented, possibly strengthening the case for the European Central Bank to expand its quantitative easing – bond purchases – in the autumn. If there is a prolonged decline in global market confidence, the US central bank could find it more difficult to move forward with higher interest rates in the second half of 2017. Central banks in countries with "safe haven" currencies, notably the Japanese yen and the Swiss franc, may also come under pressure to ease policy to prevent these currencies rising a lot further, said the report.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Sensex")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}