 "Dollar demand of oil companies keeps rupee volatile")
The rupee traded volatile on Tuesday and finally ended with marginal gains, despite sharp appreciation during the day.
According to currency experts, dollar demand from state-run oil marketing companies (OMCs) is coming into the market more and more due to which the volatility in the rupee is increasing.
The rupee ended at 62.38 compared with previous close of 62.42 per dollar. The rupee had opened at 62.21 and during intra-day trades, touched a high of 61.87. But in the last few hours before the market closed, the rupee once again started weakening and touched the day's low of 62.39 per dollar.
The rupee has gained about 2.1 per cent since last Wednesday, when the Reserve Bank of India (RBI) Governor issued a press statement to calm investors’ nerves, saying there was no fundamental reason for the volatility. On Tuesday (on November 12), the rupee touched 63.70 per dollar.
“In early trades, foreign banks were selling dollars due to which the rupee was appreciating. But later, state-run banks started buying dollars to meet the requirement of OMCs, which resulted in the rupee again coming under pressure,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
RBI Governor Raghuram Rajan said last week a majority of the dollar demand from these OMCs are back in the foreign exchange market and has been absorbed smoothly.According to currency experts, dollar demand from state-run oil marketing companies (OMCs) is coming into the market more and more due to which the volatility in the rupee is increasing.
The rupee ended at 62.38 compared with previous close of 62.42 per dollar. The rupee had opened at 62.21 and during intra-day trades, touched a high of 61.87. But in the last few hours before the market closed, the rupee once again started weakening and touched the day's low of 62.39 per dollar.
The rupee has gained about 2.1 per cent since last Wednesday, when the Reserve Bank of India (RBI) Governor issued a press statement to calm investors’ nerves, saying there was no fundamental reason for the volatility. On Tuesday (on November 12), the rupee touched 63.70 per dollar.
“In early trades, foreign banks were selling dollars due to which the rupee was appreciating. But later, state-run banks started buying dollars to meet the requirement of OMCs, which resulted in the rupee again coming under pressure,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
“Given the kind of data we have on the current account deficit, I would think that there is a reasonable case for the rupee to remain stable with a bias for appreciation. But we can come to full conclusion once we know that the full dollar demand is back in the market,” said Hitendra Dave, managing director, head of global markets (India), HSBC.
Since the start of this financial year, the rupee has weakened by almost 15 per cent. “I do not see rapid appreciation of the rupee coming through. The reason is India still has its own set of problems. Our growth still remains extremely low, infrastructure projects are still stuck, corporates are still under stress due to which even banks are under stress. There are a lot of questions asked about fiscal deficit. Inflation is also a concern. A lot of these problems are solvable, but that there are elections round the corner due to which it might take a while for solutions to come through. The range of the rupee may be between Rs 61.50 and Rs 63.50 till the end of this calendar year,” said G Ananth Narayan, regional co-head (global markets and wholesale banking, South Asia), Standard Chartered Bank.