Rupee's real effective exchange rate jumps to 107.21 in Oct from 105.34 Sept
This story was originally published at 20:57 IST on 20 November 2024
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--RBI: Rupee effective FX rate index 107.21 in Oct vs 105.34 in Sept
--CONTEXT: Real FX rate index for trade-weighted, 40-currency basket
NEW DELHI – The rupee's real effective exchange rate against a basket of 40 currencies, in terms of trade-based weights, rose to 107.21 in October from 105.34 in September, according to data released by the Reserve Bank of India on Wednesday.
The Indian currency fell 0.3% against the dollar last month due to strength in the dollar index and strong foreign portfolio outflows from domestic markets. In October, FPIs withdrew over $11 billion on a net basis from India. This is the largest monthly figure since March 2020, when the COVID-19 pandemic really hit India.
The dollar index, which measures the strength of the dollar against six major currencies, rose over 3% last month due to growing expectations that the US Federal Reserve would not cut interest rates as fast or as aggressively as expected earlier.
Even though the rupee fell against the US dollar in October, its real effective exchange rate rose as other currencies fell comparatively sharply against the greenback. The RBI actively intervened through dollar sales to prevent a sharp depreciation in the Indian currency, according to dealers.
"...the INR (Indian rupee) held its position as the least volatile among major currencies during the month. The INR appreciated by 1.8% (month-on-month) in October 2024 in terms of the 40-currency real effective exchange rate due to the appreciation of INR in nominal effective terms alongside positive inflation differentials," according to a paper by central bank staff on State of the Economy in the RBI monthly bulletin.
The 40-currency basket includes the currencies of Angola, Australia, Bangladesh, Brazil, Canada, Chile, China, Egypt, the European Union, Ghana, Hong Kong, Indonesia, Iran, Iraq, Israel, Japan, Kenya, Kuwait, Malaysia, Mexico, Nepal, Nigeria, Oman, Qatar, Russia, South Korea, Saudi Arabia, Singapore, South Africa, Sri Lanka, Switzerland, Taiwan, Tanzania, Thailand, Turkey, Ukraine, the United Arab Emirates, the UK, the US, and Vietnam. End
Reported by Pratiksha
Edited by Avishek Dutta
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