LM:Rupee pares gains on consistent dollar demand, trades at 59.84
Mumbai: The rupee gave up some of its gains against the US dollar on consistent dollar demand from state-owned banks and importers even as traders took a breather after a brisk day of trading on Monday.
At 1.45pm, the local currency was trading at 59.84, up 0.35% from its previous close of 60.05. The rupee had opened at 59.735 a dollar in the morning and touched a high of 59.59 per dollar and a low of 59.92 per dollar.
Ashtosh Raina, head of forex trading at HDFC Bank Ltd, said the rupee had opened strong on the back of expectations that the election results will give a clear mandate to the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) but since then demand for the dollar has picked up.
“Trade is slower than yesterday and there is demand for the dollar. I expect the rupee to edge lower and close towards 60 per dollar,” Raina said.
The demand for dollars was from state-owned banks, likely on behalf of the Reserve Bank of India (RBI), as it seeks to prevent a sharp rise in the rupee that would make exports uncompetitive.
“There is some demand from the central bank and importers are also covering their positions. Right now demand is outstripping supply but it remains to be seen whether it continues till close of trade,” said a dealer with a state-owned bank.
RBI has been actively mopping up dollars from the markets to avoid a sharp appreciation in the rupee, said dealers. Data released on Monday showed that RBI bought dollars worth $7.78 billion in March. The data which comes with a lag of two months, showed that RBI purchased a total of $8.75 billion in the spot market in March and sold $970 million which meant that the central bank pulled out a net $7.78 billion from the local foreign exchange market.
The dollar buying by the central bank was the highest in three months and the first since December when the RBI had bought a net $3.48 billion from the forex market.
So far this year, the rupee has gained 3.44% against the dollar, while foreign institutional investors (FIIs) have pumped in $5.7 billion in the local equity markets.
Since January, the rupee has risen 3.26% and is the second biggest gainer in Asia after the Indonesian rupiah.
The dollar index, which measures the US currency’s strength against major global currencies, was trading at 79.893, against its previous close of 79.901.
The 30-share S&P BSE Sensex gained 1.22% to trade at 23,838.65 points while the National Stock Exchange’s broader 50-share CNX Nifty index gained 1.11% to trade at 7,092.15 points.
The yield on the 10-year government bond was trading at 8.779%, from its previous close of 8.731%. The inter-bank call money rate was trading at 8.9%.
