RBI Can Sell Upto $30bn to Support Rupee; May Opt For NRI Bond

BofAML said it expects RBI to defend the 60 to a dollar level. The rupee opened 40 paise down against the dollar on Monday and was trading at 59.74 to the dollar.

Every round of volatility in the rupee (the current one has been on for over three weeks now) causes a dent of up to $15 billion to the forex reserves, and considering where the reserves stand right now, RBI can sell up to $30 billion, the report said.

The selling will get the country's import cover down to six months from the current seven months, the BofAML said.

Its strategists expect the rupee to peak at 59 to a dollar, according to the report.

RBI will start buying rupee once markets stabilise and the inflows from Unilver buy back, which would be in the region between $3 billion and $5 billion, happen, it said.

Raising the rates is not the answer to arrest the fall in rupee, it said, noting that the differential between the $Federal Reserve's lending rate and the RBI's is already at a peak of 7percent.

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