RBI steps in to prop up rupee

The Reserve Bank of India (RBI) intervened today in the foreign exchange market, resulting in the rupee gaining by over 10 paise to finish at 45. 23/25 over the previous day's close.

In the bonds market, yields edged lower as 10-year paper closed at 5.28 per cent against 5.30 per cent on Wednesday. This follows lower cut-off yields announced at the twin auctions (together Rs 10,000 crore).

According to dealers, the sale of dollars by exporters led the rupee to gain ground against the dollar. Some banks sold around $100 million in dollars, apparently on behalf of the central bank towards the end of the trading session today. The spot rupee-dollar exchange rate had closed at 45.37/38 to a dollar yesterday.

Dealers attributed the RBI's selling dollars and thereby propping up the rupee to the desire to provide a cushion for oil payments, some of which are due next week. Crude prices closed at $ 40.96 per barrel on the New York Exchange today.