The rupee bucked the weakening trend, as dollar inflows and a strong performance in the domestic share market helped the currency gain 0.7 per cent against the dollar on Wednesday. The rupee closed at 52.5 against the dollar, after trading in a narrow range of 52.45-52.80 on Wednesday.
Traders said dollar sales from exporters and foreign institutional investors in the last hour of trade contributed to the rupee’s gains in the day.
Amid improved global risk aversion, the strengthening euro also contributed to the rupee’s gains. T S Srinivasan, general manager (treasury), Indian Overseas Bank, said the dollar weakened across currencies. “The rupee’s value has appreciated. RBI actions on curbing speculation and improving the supply would slowly start showing effects,” he said.
Both the domestic equity markets closed around 3.3 per cent higher, compared to the previous day. The euro traded at $1.31 compared with $1.3085 at close in New York on Tuesday.
The rupee has been on the downward trajectory since August, owing to risk aversion and growing uncertainties on global growth prospects. Last week, it touched a fresh all-time low of 54 against the dollar. The Reserve Bank of India (RBI) announced a slew of measures to curb the artificial dollar demand and attract fund inflows to contain volatility in the foreign exchange market. As a result, the rupee opened 18 paise higher than Tuesday close of 52.88.
However, RBI’s efforts are expected to help the rupee only in the short run. “The rally seen in the rupee on Wednesday was a short-term correction. The markets can correct till 52.30 levels, and we can target 53.50 levels again,” India Forex Advisors said in a note.
RBI deputy governor Subir Gokarn on Tuesday said the central bank would use other measures to bring stability to the foreign exchange market. “For further reducing volatility and bringing stability into the market, a separate window for oil marketing companies to directly buy dollars for RBI is necessary,” said Srinivasan.
Lower trading volumes ahead of the year-end also eased pressure on the rupee. “Traders are avoiding building fresh positions ahead of the year-end,” said a dealer with a foreign bank.
Moses Harding, head (ALCO and market research), IndusInd Bank, said he expected the rupee to trade between 52 and 53 levels, with an upward bias of 51 against the dollar.
