LM:Rupee recovers from near-record lows against dollar
Mumbai: The rupee recovered from near-record lows on Wednesday amid speculation about intervention by the Reserve Bank of India (RBI) in the currency market.
The slide in the rupee was triggered by RBI governor D. Subbarao saying on Tuesday that the central bank was not defending any particular level. He also said that liquidity tightening measures will be withdrawn only when rupee volatility ends. The central bank released made its first-quarter monetary policy announcement on Tuesday.
This led the market to understand that tight liquidity conditions would be maintained for a longer-than-expected period.
A foreign exchange dealer said the RBI sold the US currency when the rupee was at 61 to the dollar.
The rupee’s slide was also aided by the dollar’s overnight strength against Asian currencies, some of which fell more than rupee.
“The dollar strengthened overnight, and currencies from Malaysia and (South) Korea have also weakened more than the rupee. The rupee is expected to touch its all-time low today,” said Ashish Vaidya, head of fixed income currencies and commodities, UBS AG India.
At 2pm, the rupee was trading at 60.97 a dollar, down 0.80% from the previous close of 60.49. It opened at 60.86 and touched a high and a low of 60.81 and 61.17, respectively.
The rupee had touched its all-time low of 61.21 per dollar on 8 July. Vaidya expects RBI to sell dollars to support the rupee.
Since January, the rupee has lost 9.8% of its value and is the second biggest loser among Asian currencies after the yen.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 81.755, down 0.08% from the previous close of 81.829.
India’s benchmark Sensex was trading at 19,341.65, down 0.03% from the previous close.
The 10-year bond was trading at 8.272% versus sits previous close of 8.244%.
The overnight call money rate was at 10.20%, up from the previous close of 10%.
