The Reserve Bank of India's (RBI) intervention in the currency market helped the rupee to end strong on Friday. This was despite increasing dollar demand from Oil Marketing Companies (OMCs) coupled with dollar demand from importers.
The rupee ended at Rs 62.83 compared with previous close of Rs 62.94 per dollar. The rupee had opened at Rs 62.90 and during intra-day trades it touched a high of Rs 62.84 and a low of Rs 63.08. The rupee breached the Rs 63 per dollar mark in early trades.
“RBI had been intervening in the market since morning and due to their intervention through state-run banks the rupee ended strong,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
According to currency experts even foreign banks bought dollars on Friday. “There was dollar buying from state-run banks to cater to the needs of OMCs due to which the rupee weakened. There was also dollar buying from foreign banks,” said NS Venkatesh, chief general manager and head of treasury, IDBI Bank and chairman of Fixed Income Money Market and Derivatives Association of India.
Since the start of this fiscal the rupee has weakened by over 15% and since the start of this month the rupee has weakened by about 2%.
The rupee may weaken further from current levels next week as month-end dollar demand from importers intensify. “The rupee may touch Rs 64 per dollar next week due to dollar demand from importers coupled with concerns of US Fed's tapering,” said Gonsalves.
Currency experts agree that the rupee is currently overvalued. “The rupee may trade between Rs 62.70 to Rs 63.15 next week. The fair value of the rupee should be between Rs 61 to Rs 62. Currently it is slightly overvalued due to dollar demand from OMCs,” said Venkatesh.
