The Indian rupee gained on Friday on the back of large dollar selling by exporters in spot and forward markets,ending a tough week that saw the currency slump to a record low as part of a broader regional market sell-off.
Friday’s gains were not enough to prevent the rupee from falling 0.8 percent for the week,its sixth consecutive weekly loss,having hit a record low of 58.98 on Tuesday.
India’s large current account deficit has made the rupee particularly vulnerable,and its fall was exacerbated after foreign investors sold a net $3.8 billion in Indian debt over the past 16 sessions.
Having shed 6.5 percent since the start of May – among the worst performances in emerging Asia – the rupee remains vulnerable to global flows,although the easing wholesale price index and better industrial output growth have helped shore up some of the domestic confidence.
“Better than expected WPI and yesterday’s revised IIP,along with some expected dollar inflows,should see the rupee appreciate for the next two weeks or so,” said Uday Bhatt,a foreign exchange dealer with UCO Bank.
The partially convertible rupee closed at 57.5150/5250 per dollar compared with 57.98/99 on Thursday.
Exporters rushed in to sell the dollar,especially with long dollar positions in the offshore market also getting unwound. A rise of nearly 2 percent in the BSE index also helped boost the rupee.
A tumbling rupee and the pressure over the current account deficit are likely to prevent the Reserve Bank of India from cutting rates despite softening inflation and decade-low economic growth,a Reuters poll showed.
Traders will also track global market reaction to the Federal Reserve’s policy statement on Wednesday amid questions about when the U.S. central bank plans to start unwinding its bond purchases.
In the offshore non-deliverable forwards,the one-month contract was at 57.85,while the three-month was at 58.46.
In the currency futures market,the most-traded near-month dollar/rupee contracts on the National Stock Exchange,the MCX-SX and the United Stock Exchange all closed around 57.64 with a total traded volume of $6.43 billion.