Mumbai: The rupee backed away from a recent 9-year high, falling as much as 1% against the dollar on 12 July, with dealers citing RBI intervention as the key factor.
At 2:12pm (08:42 GMT), the partially convertible rupee was at 40.54/55 per dollar, after falling to a two-week low of 40.75 from a high of 40.33 in the morning.
It had closed at 40.40/41 on 11 July, and had hit a nine-year high of 40.28 in late May.
“They (the central bank) came in very aggressively around the 40.35-40.40 levels and kicked (dollar/rupee) higher,” said a local trader.
“The market was forced to cut back on its heavy short-dollar bets,” he said.
Traders said the central bank may have bought around $200-$400 million.
“The Reserve Bank of India (RBI) does not comment on the day to day movement of the currency,” a central bank spokeswoman said.
The central bank had bought $2.06 billion through currency market intervention in April, taking its total purchases to $24 billion for the six months from November.
It is suspected of selling rupees over the past month to keep the dollar above Rs40.
Heavy capital inflows have pushed the rupee up by about 9 percent so far in 2007, making it Asia’s best performing currency and forcing the central bank to intervene heavily to protect exporters’ margins.
Infosys Technologies, India’s number-two software exporter, on 11 July cut its full-year earnings forecast in rupee terms and said the currency’s sharp rise was hurting its operating margins.
Foreigners have bought Indian shares worth more than $7.5 billion so far in 2007, against $8 billion for the whole of 2006.
RBI Governor Y V Reddy said earlier this month the central bank was facing severe policy challenges in managing capital flows and analysts expect overseas borrowings to be tightened to help curb inflows.