Mumbai: The rupee gave up all its gains and weakened against the US dollar on Friday as dealers covered their dollar positions after Bloomberg TV India reported, citing three unnamed people, that the Reserve Bank of India (RBI) is in talks with oil marketing companies (OMCs) to close the special dollar swap window. The rupee, which had touched a two-month high of 60.9325 per dollar earlier in the day, fell sharply as dealers bought dollars, fearing demand from oil marketing companies would return. At 2.20pm, the rupee was trading at 61.3150 per dollar, down 0.15% from its previous close of 61.22. The partially convertible currency opened at 61.185 per dollar and touched a high and a low of 60.9325 and 61.71, respectively. The swap facility was opened by RBI on 28 August in response to the sharp depreciation of the rupee to take the dollar demand from OMCs out of the forex market. Under the special swap window RBI has been so far buying and selling dollars for a fixed tenor. “The news that RBI may shut the window surprised dealers. Many of us were sitting short on dollars because the inflows were healthy today, but we were all forced to cover our positions,� said a dealer with a private sector bank. The rupee fell sharply to as low as 61.71 per dollar after the news reports, which forced the RBI to issue a clarification. “The Reserve Bank of India today clarified that the Oil Marketing Companies (OMC) swap window remains operational. Any tapering of the window, as and when it occurs, will be done in a calibrated manner,� RBI said in a two-line statement on its website. “The clarification from the RBI has settled down trade. I expect the dealers who had bought dollars in panic earlier to come back now and adjust their positions which will help rupee to recover more from the current levels. It could end at Rs.61.20 per dollar or even Rs.61.10 per dollar,� said the dealer with the private bank. Since January this year, the rupee has weakened 10.31%, the third most after the Indonesian rupiah and Japanese yen among Asian currencies. The dollar index, which measures the US currency’s strength against major currencies, was trading at 79.651, flat from the previous close of 79.649. The strength in the local stock market was supporting the rupee. India’s benchmark Sensex was trading at 20,843.3, up 2.1% or 427.79 points from the previous close. The 10-year bond was trading at 8.581%, down from previous close of 8.602%. It opened at 8.605% and touched a high and a low of 8.62% and 8.567%, respectively. The overnight call money rate was at 8.825%, down 1.4% from previous close of 8.95%. It opened at 9.05% and touched a high and a low of 9.07% and 8.82%, respectively.

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