Rupee firms up after IMF approves loan

Reuters: The rupee gained on Monday after the International Monetary Fund (IMF) approved a three-year $1.5 billion loan for the island nation, boosting investor sentiment.

The IMF’s Executive Board approved the loan over the weekend in a move that is expected help support the reform agenda in the South Asian country hit by a balance-of-payments crisis.

The main objectives of the programme include reforms aimed at boosting Government revenues to reduce fiscal deficit, improving foreign exchange reserves and reducing public debt and risk of debt distress.

The dollar/rupee forwards, known as spot next, ended at 146.00/25 per dollar, compared with Friday’s close of 147.00/05.

Spot next, which acts as a proxy for the spot currency, indicates the exchange rate for the day following conventional spot settlement, which is three days ahead for Monday’s trade.

The spot currency did not trade on Monday.

“There was dollar selling in the market. Some are selling with expectations of the IMF money strengthening the rupee,” a currency dealer said.

Dealers said it was unclear how the IMF loan would impact the rupee over the long term as there was still no clarity on the conditions imposed by the lender.

The IMF said the transition to flexible inflation targeting under a flexible exchange rate regime was one of the pillars of the loan program.