India's rupee will not drop past the 84-per dollar mark even if the greenback strengthens further from current levels as the nation's central bank will step in to defend the currency, according to Standard Chartered Plc.
"The Reserve Bank of India has been protecting rupee from depreciating very sharply," Parul Mittal Sinha, head of India financial markets at the lender said on Bloomberg TV Friday. The monetary authority has "been following the stated policy of containing volatility in the rupee," she said.
Sinha said the RBI will continue to maintain tight liquidity conditions to help support the rupee unless "we see big shocks from the global markets or if crude starts trending higher."
The unexpected resurgence in the dollar is reverberating across the world, with the oil's march toward the $100 mark dealing a double blow to energy-importing nations. This has sent central banks moving to the frontlines to protect their currencies.
"When the tide turns, whenever the dollar starts weakening, we expect RBI to step in from the other side, collect and build dollar reserves even further and not allow rupee to appreciate too much," Sinha said. "It's going to be a balancing act, with the RBI present on both sides to reduce volatility and provide rupee the stability that all investors love."
While the rupee has fallen 0.4 per cent against the dollar so far this year, it is still one of the best-performing currencies in emerging Asia. It traded at 83.08 at 1:10 p.m. in Mumbai. India's forex reserves currently stand at about $593 billion, down from about $609 billion in July.
India's inclusion by JPMorgan Chase & Co. to its key emerging-market gauge is seen increasing foreigner participation in a historically insular market where they currently hold less than 2 per cent of the outstanding sovereign debt. That's expected to go up to 6%-8% over the next four years, she said.