Mumbai: Rupee strengthened on Monday as it was buoyed by Reserve Bank of India’s (RBI) measures to encourage foreign deposits, but gains were capped as a fall in the stock market raised concerns of further capital outflows.
At 10:10am, the partially convertible rupee was at Rs48.87/90 per dollar, 0.3% stronger than Rs49.01/03 at the close on Friday. It hit a record low of Rs50.29 touched on 27 October.
“Some Asian markets have just turned slightly positive, helping the rupee,” said V.Kumar, chief dealer with State Bank of Travancore.
“The RBI’s measures announced on Saturday should also add some temporary strength to rupee. Buy dips will be the strategy. Today’s range would be Rs48.80 to Rs49.40. The Sensex (stock index) will also have to be watched,” he added.
RBI on Saturday took various measures to improve liquidity and help exporters, including an increase of the interest rate ceiling on deposits of non-resident Indians with local banks.
Economists said that the measures were to attract fresh foreign money into the banking system and prop up the struggling rupee.
Indian stocks opened slightly stronger but turned sharply negative on a deteriorating outlook after Japan joined the list of economies in recession.
Foreign funds have already sold a net $12.9 billon worth of Indian shares in 2008 after buying a record $17.4 billion last year.
One—month offshore non—deliverable forward contracts were quoting at Rs49.21/36 per dollar, weaker than the onshore spot rate, indicating a bearish outlook for the currency.