Rupee recovers to 58.39 on suspected RBI intervention


Suspected RBI intervention hauled the rupee off a record low struck on Tuesday afternoon, reassuring a market worried by the central bank’s earlier inaction as the currency’s fall gathered pace.

Striking 58.98 per dollar at its weakest, the rupee had plunged 3.25 percent so far this week, notching record lows for two consecutive days.

Dollar-selling by state banks, believed to be acting at the behest of the RBI, prevented a fall though the 59 per dollar level, though intermittent bouts of dollar selling by exporters had also slowed the fall.

The partially convertible rupee recovered to 58.39 per dollar, but it was still weaker than Monday’s close of 58.15/16.

“Finally the central bank stepped in. The selling was not huge but enough to cause a rebound in the rupee,” said a senior dealer with a state-run bank, who declined to be identified given the sensitivity of the matter.

Comments from senior government officials have offered little comfort to investors. Economic Affairs Secretary Arvind Mayaram said the government will not take steps to stem the rupee’s slide and it expects the currency to stabilize within days.

Analysts believe pressure on the currency had intensified after comments on the limitations of currency intervention by Reserve Bank of India Governor Duvvuri Subbarao on Friday.

Subbarao said a failed defence of rupee can be worse than no defence, and reiterated that the central bank intervenes in the market only to manage volatility.

“Fundamentally, INR will continue to depreciate because of CAD (current account deficit), but this move has happened too soon and too fast,” said Samir Lodha, managing director at QuantArt Market Solutions….

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