Rupee breaches a psychological barrier

The spot rupee today breached the psychological level of 44.50 per dollar to touch 44.44/45, a rise of 19 paise from Tuesday's close of 44.64.

The currency appreciated on the back of strong dollar inflows from foreign institutional investors.

"State-owned banks that were acting on behalf of the Reserve Bank of India (RBI) capped the rupee at 44.43 levels," said a dealer with a private bank. At 44.44/$, demand for dollars came from some oil companies, which took the rupee to a intra-day low of 44.47, he added.

However, greenback sales by exporters at 44.48 levels arrested the decline. Spot rupee is expected to trade in the range of 44.40-44.50 per dollar on Thursday, he added.

Rupee premiums on forward dollars edged up slightly as importers and borrower companies hedged their positions after the RBI warning earlier this week asking banks to guard against their clients unhedged foreign currency exposures.

The annualised premium on the benchmark six-month dollar closed 3 basis points higher at 0.96 percent.

Meanwhile, foreign institutional investors (FIIs) pumped in $273.4 million into the Indian financial markets on November 30, providing the basic leg-up to the local currency.

FIIs have invested around $1,774.6 million in the capital and debt markets in November, according to data released by the Securities and Exchange Board of India.