 "Oil firms' dollar window could be narrowed")
As the volatility in the rupee has reduced since end-August, the Reserve Bank of India (RBI) is likely to ask the government-owned oil marketing companies (OMCs) to meet part of their monthly dollar requirements from the market.
However, say market participants, the central bank would not make a formal announcement on this, to avoid volatility in the rupee, which it has been able to control to a great extent since August.
Earlier this month, RBI clarified that the OMCs’ swap window remains operational and any tapering, when it occurred, would be done in a calibrated manner. RBI had opened this swap window on August 28 for the three OMCs — Indian Oil, Hindustan Petroleum and Bharat Petroleum. On that day, the rupee had touched an all-time low of 68.85 to a dollar during intra-day trade.
“The market buzz is that OMCs might have been asked by RBI to cover 15-20 per cent of their monthly dollar requirements from the market. This is also in line with RBI's statement of the swap window being withdrawn in a calibrated manner,” said Partha Bhattacharya, deputy chief executive officer, Mecklai Financial.
The rupee closed at 61.47 to a dollar on Thursday, compared with Wednesday’s close of 61.59. Since the start of this month, the rupee has strengthened by 1.8 per cent; since August 28, by 10.7 per cent.
Some experts said the likelihood of a further cut in the Marginal Standing Facility (MSF) rate is low and bringing back the OMCs’ demand into the system is more likely. According to Pradeep Madhav, managing director, STCI Primary Dealer, the rupee might have stabilised but the reason is due to taking the OMCs’ demand out of the system. Hence, the first step could be to bring back the OMCs’ demand and then see if the rupee is still stable, before cutting the MSF rate further. It is currently at nine per cent.
However, say market participants, the central bank would not make a formal announcement on this, to avoid volatility in the rupee, which it has been able to control to a great extent since August.
Earlier this month, RBI clarified that the OMCs’ swap window remains operational and any tapering, when it occurred, would be done in a calibrated manner. RBI had opened this swap window on August 28 for the three OMCs — Indian Oil, Hindustan Petroleum and Bharat Petroleum. On that day, the rupee had touched an all-time low of 68.85 to a dollar during intra-day trade.
“The market buzz is that OMCs might have been asked by RBI to cover 15-20 per cent of their monthly dollar requirements from the market. This is also in line with RBI's statement of the swap window being withdrawn in a calibrated manner,” said Partha Bhattacharya, deputy chief executive officer, Mecklai Financial.
The rupee closed at 61.47 to a dollar on Thursday, compared with Wednesday’s close of 61.59. Since the start of this month, the rupee has strengthened by 1.8 per cent; since August 28, by 10.7 per cent.
Some experts said the likelihood of a further cut in the Marginal Standing Facility (MSF) rate is low and bringing back the OMCs’ demand into the system is more likely. According to Pradeep Madhav, managing director, STCI Primary Dealer, the rupee might have stabilised but the reason is due to taking the OMCs’ demand out of the system. Hence, the first step could be to bring back the OMCs’ demand and then see if the rupee is still stable, before cutting the MSF rate further. It is currently at nine per cent.