The Reserve bank of India in its first bi-monthly monetary policy in the financial year 2021-22 is expected to keep interest rates (repo rate) on hold at 4 percent on April 7, 2021.

The rupee has remained resilient and volatility on the currency remains quite low as reflected on the extent of global risk-off.

Despite many adverse factors in the overseas markets, the rupee showed no significant negative impact until last week. However, things changed when the spread of the coronavirus beyond mainland China into some Asian countries has significantly weakened the Asian currencies against the dollar.

It looks like the apex bank is hoarding reserves as prevention to any upcoming headwinds which will then be used as a ‘Brahmastra’ to protect the exchange rate from any severe attack arising out of geopolitical calamities.

The rupee is stuck between two giants keeping it vulnerable — central bank on bid and market on offer. Let’s see who blinks first.