Indian currency headed for its biggest-ever annual drop since the devaluation in 1991.
The rupee On Tuesday hit a new lifetime low of 50.61 against the dollar in early trade as stock markets fell and other Asian currencies also weakened.
But, according to data compiled by Bloomberg, the Indian currency later recouped the losses to close at 50.15, a gain of 0.3 per cent or 14 paise from yesterday’s close of 50.29 against the greenback.
The rupee has fallen over 27 per cent in 2008 and is headed for its biggest-ever annual drop since the devaluation in 1991.
While a part of the gain later in the day was attributed to the recovery in stock markets, sale of dollars by some large exporters and intervention by the Reserve Bank of India (RBI) helped the rupee appreciate, dealers said.
Repeated intervention by the central bank has seen the country’s foreign exchange reserves falling over $70 billion from a record $316.2 billion in May.
A dealer at a public sector bank said a large exporter sold dollars when the rupee was trading around 50.40. A large engineering company is also said to have sold around $200 million around that level, while another IT company was a dollar seller On Tuesday.
Banks also unwound their long-dollar positions after the stock market recovered.
Dealers said RBI was selling dollars at different levels during the day, which limited the rupee fall. Four public sector banks sold around $500 million of the greenback on behalf of RBI, dealers said.
| NEGATIVE SENTIMENT Currency per dollar | |||
| Jan-02 | Dec-02 | % Chg | |
| Korean won | 936.95 | 1464.55 | -56.31 |
| Indonesian rupiah | 9386.00 | 12375.00 | -31.85 |
| Pakistani rupee | 61.32 | 78.70 | -28.34 |
| Indian rupee | 39.44 | 50.15 | -27.15 |
| Thai baht | 29.75 | 35.65 | -19.83 |
| Malaysian ringgit | 3.31 | 3.64 | -9.88 |
| Source : Bloomberg | |||
As Indian stock markets fell in early trade, there was a heavy demand for dollars on worries that there may have been some FII outflow.
The forward premiums ended off lows because banks bought forward dollars and booked profits, dealers said.
“By the end of trade, receiving by them (RBI) reduced. So, banks bought forward dollars and made profits,” said a dealer at a state-owned bank.
Forward dollar demand from some importers also made the premiums to end off their lows, dealers added.
Earlier On Tuesday, state-owned banks entered into buy-sell swap on behalf of RBI to nullify the impact of dollar sales in the spot rupee market. A very large state-owned bank and another public sector bank were said to have entered into such swap deals, dealers said.
Such forward dollar sales dragged the benchmark one-year forward premium to the day’s low of 1.66 per cent.
The one-year forward premium ended at 1.78 per cent compared with 1.86 per cent on Monday.
