The rupee fell to an all-time low of 56.52 against the dollar but closed 0.2 per cent up over the previous close on talk that the Reserve Bank of India (RBI) had facilitated a special window to meet foreign exchange requirements of oil companies through public sector banks.
The rupee bounced back to 55.74 in the latter part of the day to close at 56.11 against the dollar. The euro had touched an 11-month low of 1.2367, while the dollar index was trading at a nine-month high levels of 83.02 when the rupee opened for trade on Thursday.
“All happened in a matter of minutes...exporters were quick enough to take advantage of low levels when the rumours that oil companies will not buy dollars from foreign banks hit the markets at around 3 pm,” said a senior treasury official of a private bank based here.
The official added the central bank might appoint four large public sector banks to meet the dollar demands of oil companies. Also, the banks would be required to report the dollar buying by oil companies hourly to RBI.(Click here for charts)
Last week, RBI Governor D Subbarao had said the idea of opening a special window for oil companies was on the table. Presently, oil marketing companies are the major buyers of dollars in the spot foreign exchange market. Dollar demand is also coming from foreign investors that are exiting from weak domestic markets and companies that need to repay foreign debt.
However, towards the end of the trade, agencies reported a senior RBI official and oil marketing companies denying implementation of any such measure. A rise in the euro from 11-month low levels and dollar flows from exporters prevented the currency from going back to the all-time low.
“The rupee may again open weaker tomorrow, depending on how the euro fares in overnight trade,” said a forex dealer with a domestic consultancy firm.
According to the Bombay Stock Exchange, foreign institutional investors were net sellers on Thursday, with Rs 665 crore worth of outflows from the equity markets. The BSE Sensex ended the day down 0.6 per cent. News of the dismal economic performance in the fourth quarter of 2011-12 also hit investor sentiments on Thursday. Gross domestic product growth for January-March was 5.3 per cent, against 9.2 per cent in the corresponding period a year before.
“RBI’s measures since December had only momentary impact on the rupee. The currency continues to suffer from global headwinds because of weak domestic fundamentals,” said a senior treasury official from a public sector bank. Some of the measures include relaxed ceilings on deposits for non-resident Indians, curbs on speculative trading arising out of arbitrage in currency forwards and the futures markets, and exporters being asked to liquidate half of unused dollar funds.
Also, the central bank’s intervention in the spot market has been $20 billion since September 2011.
Despite these measures, the rupee has depreciated by 6.4 per cent in May and by a little over 10 per cent since the start of the current financial year.
