The rupee today gained 5 paise to close at 54.42 against the dollar with RBI’s swift action pulling it back from near 55-levels touched in early trade amid strong capital outflows.
At the Forex market,the domestic currency in early trade threatened to breach the 55-level as it slumped to 54.91,its fresh all-time low hit in the third straight session,as copious fund outflows continued amid Eurozone worries.
Dealers said strong dollar demand from importers,mainly oil refiners,on expectation of further rise in dollar on concerns caused rupee’s fall.
However,RBI stepped in and stemmed the rupee’s slide.
There was selling of dollars by public sector banks (at the instruction of RBI) which has supported rupee after falling to an intra-day low of Rs 54.91 level,said N S Venkatesh,Treasury Head,IDBI Bank.
The central bank’s Deputy Governor Subir Gokarn in Kolkata today also said RBI will continue to intervene and take administrative measures to protect the rupee,boosting the sentiments in favour of the rupee.
“The approach over the last few months have been a combination of intervention at times when we have felt it will help us stabilise,and some administrative action. This is the approach that will work now,” said Gokarn on the sidelines of an event here.
Forex dealers also said that a sudden gush of dollar selling at the fag end by exporters amid recovery in local stocks aided the rupee recovery as the domestic unit touched a high of 54.40 before closing at 54.42. The currency has lost over 22 per cent against the dollar in the past one year.
However,experts do not feel rupee’s woes against the dollar are over for now as the Indian economy continues to battle with fiscal as well as budget deficits and Greece’s possible exit from Eurozone keeps fundamentals intact in favour of the American currency.
“It is difficult to say whether rupee is consolidating at the current level or will fall further as RBI is watching the market,” said Viral Shah,Head – Institutional Business,Geojit Comtrade.
The BSE benchmark sensex,which was down by almost 261 points at early afternoon session,recovered on late buying support due to strong Q4 results by banking giant SBI and ended up by 82.27 points or 0.51 per cent. This along with dollar index falling also helped turn the tide against rupee,according to dealers.
Pramit Brahmbhatt,CEO,Alpari Financial Services (India) said,”The RBI’s deputy governor’s comments to curb the rupee volatility and subtle retreat in dollar index which improved the risk sentiments in global currencies aided the rupee.”
The psychological mark of 55 also acted as resistance level making the exporters and traders greedy enough to lock in profits at higher prices,he added.
Currency experts also said RBI could soon be announcing some major measures to stem the rupee’s weakness.
Abhishek Goenka,CEO,India Forex Advisors said,”The RBI is seen quiet after rupee created new lows. The quietness of the RBI could be because of their preparation to get some major move to support the rupee. For next one month,we can see rupee ranging between 53.50¿55.50 levels.”
The rupee premium for the forward dollar also recovered on fresh paying pressure from banks and corporates.
The benchmark six-month forward dollar premium payable in October ended up at 154-156 paise from Thursday’s close of 151-153 paise and far-forward contracts maturing in April also finished higher at 272-274 paise from 262-264 paise.
The RBI fixed the reference rate for the US dollar at 54.8755 and for euro at 69.4885.
The rupee improved further to 86.04 against the pound sterling from 86.24 previously while fell back to 69.16 per euro from 69.05. It dropped further against the Japanese yen to 68.58 per 100 yen from last close of 67.92.