The rupee recovered from its day’s low of 68.61 against the dollar to 66.80 on the back of intervention by the Reserve Bank of India and recovery in the domestic equity market.
At 4.25 p.m., the domestic unit was trading at 66.97 to the dollar.
The unit shed 60 paise to 68.25 per dollar in the opening trade against the previous close of 67.65 due to heavy capital outflows and continued fears of a downgrade by rating agencies.
It fell to 68.61 due to continued concerns over growth, downgrade fears and a possible US war on Syria fuelling concerns over oil import bill.
Downgrade fears
S&P, Fitch and Moody’s have aired their concerns in recent weeks, as the slowdown in growth threatens to derail the fiscal austerity plans. On Monday, S&P put India’s chances of a downgrade higher than Indonesia. This has elicited concerns among market investors.
Rajan effect
However, the RBI intervened by asking public sector banks to sell dollars. In addition, appointment of the new RBI Governor Raghuram Rajan improved the sentiments in the forex market.
Dollar window
Last week, the Reserve Bank of India’s special dollar window for oil retailers had helped ease the offshore non-deliverable forward (NDF) contracts thereby limiting the losses due to speculation in the currency market.
However, this did not help as lower GDP and manufacturing sector growth data subdued the investor sentiments yet again.
The rupee had touched a historic low of 68.80 against the US dollar on August 28.
