The rupee recovered all its losses and traded flat after banks sold dollars, probably for the Reserve Bank of India, dealers said. Some dealers also cited the inflow of foreign funds as a reason for the rise in the rupee. Earlier in the day, the rupee touched a record low of 84.77 per dollar.
“RBI has now started selling aggressively after they attended with light intervention in the morning,” a private bank dealer told Informist. The rupee came under pressure on Tuesday due to buying of dollars by importers who demanded dollars in anticipation of further decline in the national currency, dealers said.
According to dealers, the strengthening of the dollar index also put pressure on the Indian currency. The dollar index was strong after data showed a slower contraction in the US manufacturing sector. The index, which measures the dollar’s strength against a basket of six major currencies, stood at 106.41 at 1325 IST, against 106.38 on Monday and 105.78 on Friday.
Some dealers told the News Agency that the rupee gained when foreign banks sold dollars on behalf of their foreign clients who wanted to invest in Indian stocks. Both Nifty 50 and BSE Sensex were up 0.8 percent by 1430 IST.
Ahead of Tuesday’s continued intervention in the spot market, the central bank also sold dollars in the offshore forward market without supplies to support the rupee. Before opening at 84.71 per dollar, the rupee was trading around 84.78 per dollar in the offshore market.
Dealers expect importers to continue buying dollars, thus maintaining pressure on the rupee. The rest of the time, the rupee is likely to move in the range of 84.60-84.80 against the dollar. Dealers see strong immediate technical resistance for the Indian unit at $84.60.
