Mumbai: The rupee ended little changed on Tuesday as dollar sales by exporters and suspected central bank intervention helped offset the pressures from a weaker euro and from demand for the US currency from oil firms.
Whether the Reserve Bank of India intervened generated split views among traders, and any dollars sales were likely to have been mild, they added.
The rupee remains well above the record low of 56.52 against the dollar hit on Thursday, and traders say the RBI could intervene more aggressively should the rupee again fall below 56 to the dollar.
Global risk factors will remain key in the near-term, especially ahead of a meeting of G7 finance ministers that is expected to address the growing euro zone debt woes.
The rupee has also been hit by waning confidence on India’s economic outlook, although a majority of economists polled by Reuters now predict at least a 25 basis points cut at its 18 June meeting.
“Demand for dollars is likely to stay high amid uncertainty in Spain and ahead of the Greece elections, keeping pressure on the rupee,” said Pramod Patil, a forex dealer with United Overseas Bank.
The rupee fell to an intra-day low of 55.91 before closing at 55.64/65 as per the SBI closing rate, not much changed from its 55.66/67 close on Monday.
The local currency had started the day with gains on the back of some revival in risk-taking globally, pushing the rupee at one point to a one-week high of 55.25 per dollar in early trade.
However, that was later offset as oil companies, the largest buyers of dollars in the domestic currency market, stepped up purchases of the US currency.
The euro also skidded, pressuring the rupee, on ongoing concerns over whether Spain can restore its banks to health.
Whether the RBI intervened remains in doubt, after the central bank had sold dollars frequently in both spot and forward markets last month.
“There were state-run banks on offer starting 55.87 levels, not sure whether it was for the RBI, but could very well be,” a senior dealer with a foreign bank said.
Offshore traders expect further weakness in the rupee. The one-month offshore non-deliverable forward contracts were quoted at 56.01, while the three-month was at 56.73.
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 55.93 on a total volume of $3.7 billion.