RBI intervention failing to yield results: Mecklai

The rupee has been depreciating since the past 9 months due to large fiscal deficit, political uncertainties and policy paralysis. The RBI, on a regular note, has been intervening to curb depreciation in Rupee, but it is failing to have any desired impact on Rupee.

As can be observed from the below graph, whenever RBI has come in the market to sell Dollar, there was notable appreciation in Rupee during the days ahead. This can be observed during the period from November 2011 to January 2012, when RBI intervened heavily to support the Rupee.

Nevertheless, the recovery in Rupee was rather short-lived as the currency has continued to tumble since then and has recently fallen to its record low of 54.90 levels. The recent intervention by RBI has failed to offer support to Rupee as it is being largely offset by Dollar buying from importers & oil companies as well as strength in Dollar overseas against its G7 and Asian counterparts.

The below graph shows the intervention of RBI at various levels in its attempt to support the Rupee during past 9 months

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