The rupee On Thursday reached its highest level against the dollar in nearly two weeks before erasing gains due to demand for the US currency from banks and importers.
Following Standard & Poor’s revision of India’s sovereign rating outlook from stable to negative on February 24, there was heavy pressure on the rupee on fears that the next move could be a downgrade to sub-investment grade.
This prompted foreign institutional investors (FIIs) to shun Indian stocks debt papers and put pressure on the currency, which hit a new lifetime low of 52.18 against the US dollar on March, 6.5 per cent lower than the level at the start of this year.
Forex traders said that the rupee opened stronger in line with the trend seen in other currencies. Even during the last two days when the markets were shut on account of Eid and Holi, the dollar had weakened against most Asian currencies.
In addition, the stock market indices also sent positive signals to the market. Today, the Bombay Stock Exchange’s Sensex and the National Stock Exchange’s Nifty ended up 2.25 per cent and 1.72 per cent, respectively.
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The rupee pared gains after the latest industrial production data was released. Among banks, a large state-owned bank was said to be a major purchaser of the greenback today and is estimated to have bought $150 million today. According to dealers, continuous dollar demand from the bank led to expectations that this could be for making defence-related payments.
A large private petrochemical company is also said to have bought around $50 million. Some banks also sold the greenback noting the rise in local share indices, dealers said.
Offshore contracts indicate dealers will bet the rupee to trade at 52.16 a dollar in a month, compared with expectations of 51.83 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Futures contracts on NSE and MCX ended down today tracking the movement in the spot market. On NSE, the one-month dollar-rupee contract ended at 51.96 a dollar, compared with 52.07 on Monday.
The MCX one-month contract ended at 51.96 against the previous close of 52.07 a dollar.
Overnight rates unchanged
Call rate stayed unchanged due to comfortable liquidity in the system. According to data on the Clearing Corporation of India website, the weighted average call rate was unchanged at 3.58 per cent, with the closing rate of 3.60 per cent. Rates hovered between 2.00 per cent and 3.70 per cent.
In the collaterialised borrowing and lending operations (CBLO) segment too, rates were largely unchanged at 3.20 per cent, as against 3.18 per cent on Monday. On a net basis, banks parked Rs 51,545 crore through the reverse repo window. Only one bank accessed the repo window to raise Rs 950 crore.