The Reserve Bank of India (RBI) has announced a range of measures designed to boost the country's currency, the rupee.
It was announced that it will auction 220 billion rupees (£2.3 billion) of government cash management bills every Monday.
However, the RBI would not say how long the scheme is expected to run for. Action was needed to support the rupee after it slipped to a record low of 61.80 against the US dollar on Tuesday (August 6th).
The "measures are an effort to siphon off excess liquidity from the system and will help the rupee," said Shubhada Rao, chief economist with private Yes Bank, who added: "But liquidity tightening measures are not enough. Growth will have to become a priority."
Since the start of the year, the rupee has lost around 12 per cent of its value, so the RBI will be hoping that this step will help to reverse the trend and boost the struggling currency.
Royal Dutch Shell recently blamed adverse currency rates as one of the reasons why the company recorded a fall in its latest profits.
Find out about commodities trading and learn CFD strategies at City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.