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The rupee recovered from a three-month low on Tuesday, after the Reserve Bank of India (RBI) intervened in the currency market through state-run banks.
The rupee ended at 62.85 a dollar compared with previous close of 62.92. The rupee had opened above the 63-mark tracking the Deliverable Forward (NDF) markets, and during intra-day trades, it touched a low of 63.16. The rupee had ended at 63.18 a dollar on January 7 this year. During intra-day trades, the rupee touched 62.75 a dollar.
“The rupee weakened during intra-day trades due to outflows on account of Japan’s Daiichi Sankyo’s share sale in Sun Pharmaceutical. The RBI intervened through state-run banks due to which the rupee saw some recovery,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai. Gonsalves added the bias for the rupee might continue to be weak as month-end dollar demand from importers will emerge.
On Tuesday, Sun Pharmaceutical Industries plunged on the bourses, following Japan’s Daiichi Sankyo’s $3.6-billion share sale in the company. However, foreign institutional investors were net buyers in equities by Rs 17,488.73 crore. This is 95.28 per cent higher than the previous single-day record in February 2012. They were net buyers then by Rs 8,955.3 crore.
“The rupee might weaken to even 63.60 because it depends on how far the risk-aversion intensifies in the domestic equity market. The 63-64 range for the rupee is a comfortable range. Panic is not going to come in as long as the 64-mark is not breached,” said Banerjee, currency analyst, Kotak Securities.
In the recent past, the RBI had been buying dollars through state-run banks in a bid to boost its foreign exchange reserves. The country’s foreign exchange reserves stood at $340.41 billion for the week ending April 10.
Now, these reserves are useful considering the rupee may weaken further from current levels. Besides that sometime in 2015 the US Fed is expected to hike interest rates which may intensify the outflows from domestic markets. Many currency experts are of the view that like other emerging market currencies, even the rupee will weaken at that time against the dollar.
