MUMBAI: The Indian rupee rallied to an eight-month high, boosted by continued foreign fund inflows into domestic shares, but suspected dollar purchases by the central bank prevented the currency from gaining much further.
The intervention on Wednesday was aggressive, with two traders telling Reuters that the Reserve Bank of India (RBI) likely bought nearly $1 billion and swapped it in forwards markets.
The RBI has long been expected to start buying dollars when the rupee strengthens to add to foreign exchange reserves of $297.29 billion - the highest since late December 2011.
The central bank´s Dollar purchases would reflect the strength of a rupee rally. The RBI had to regularly buy the domestic currency just about half a year ago to keep it from hitting record lows.
“The sentiment is in favour of the rupee,” said Paresh Nayar, head of fixed income and foreign exchange trading at First Rand Bank.”
Now 60 is a very crucial psychological level, which if breached, may trigger stop losses and there will be fresh views in favour of the rupee,” Nayar said.
