Closing modestly higher on Friday, the rupee logged its weekly fall as the dollar demand related to merchant flows, arbitrage, rates and maturities in the non-deliverable forward market outweighed comfort from a broadly weaker US dollar. The Indian currency declined by nearly 1%, closing at 95.21 per dollar, clipping past the 95 per dollar level for the first time in three weeks. According to analysts, the recent move by RBI that has improved foreign portfolio inflows into the government bonds and expectations of a balance of payment surplus for the year ending March 2027 has improved the sentiment of the rupee, despite a tough day-to-day flow.
The dollar index was down by 0.2% at 100.7 and on the course for its biggest weekly loss in 12 weeks since Friday, after a tepid U.S. jobs report cooled market expectations for a near-term Federal Reserve interest rate hike. Markets are now pricing in about a 53% chance for a hike at the September meeting, according to data.
In a separate development, the government of India is evaluating a proposal to allow jewellers to participate in a revamped gold monetization scheme as a part of its efforts to bring into circulation a portion of the nearly 30,000 tonnes of gold estimated to be lying idle within Indian households. The move is aimed at reducing India’s reliance on imported gold and would mark the first time jewellers are being included in the scheme.
Despite being in operation for 11 years, the gold monetization scheme has succeeded in mobilizing only 39 tonnes of gold from Indian households, according to industry executives who have studied the data. It allowed deposits starting from 10 grams with no upper limit. However, the program scaled back. From March last year, only the short-term bank deposit options with tenures ranging from one to three years, which remained in force after the government discontinued the medium and long-term deposit variants.
Under the scheme, depositors submit their gold to an authorized collection purity testing center, where it is tested for purity. Following the depositor’s consent, the gold is melted and refined into a standard 995 purity gold before being credited to a gold deposit account maintained within a bank. The depositors then receive interest in rupees and on maturity have the option of withdrawing an equivalent quantity of gold or its value in rupees based on the prevailing market price.
Under the proposal, model jewellers would gain access to monetised domestic gold, provide them with a dependable and relatively low-cost source of raw material, reduce reliance on imported bullion, improve inventory management and lower financial expenses.