However, the local unit gave up a chunk of its gains against the dollar as traders doubted the measures, including requiring exporters to convert half their foreign exchange holdings into rupees, would be enough to prevent more falls in the local unit.
On top of that, the Reserve Bank of India was suspected of having intervened in the afternoon session, continuing its active dollar sales in markets since last week.
“INR will get some respite from these measures, but is unlikely to reverse trend. RBI knows this and, at best, wants to manage the adjustment, otherwise it would not have allowed the INR to adjust as much as it has,” said Rajeev Malik, senior economist at CLSA in Singapore.
He expects the rupee to fall further to 55 to the dollar.
The rupee settled at 53.44/45 to the dollar, after it had closed at 52.82/83 on Wednesday, a record closing low. The currency is still within sight of a record low of 54.30 hit in December.
The rupee has been caught in a maelstrom of domestic factors, including a widening current account deficit, and more recent global ones such as the fears over the euro-zone.
That’s preventing any significantly rallies in the currency. On Thursday, USD/INR had fallen to as low as 52.95 soon after the RBI announcement, but then reversed course.
“RBI is doing all it could to protect rupee weakness beyond 54,” said J. Moses Harding, head of asset liability committee at IndusInd Bank.
Harding added the “underlying trend for rupee continues to stay bearish into short term till fundamental concerns are out of the way.”
The one-month offshore non-deliverable forward contracts were at 53.75.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 53.61 on a total volume of $6.17 billion.
