BackRupee pulls back after suspected RBI intervention
Rupee pulls back after suspected RBI intervention
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Mumbai: The rupee ended off lows on Wednesday, recovering most losses after suspected Reserve Bank of India (RBI) intervention, but global risk aversion meant the Indian currency would remain under pressure in the near term, dealers said.
Foreign funds have been pulling out of shaky stocks and oil refiners who import about three-quarters of India’s crude consumption have been heavy buyers of dollars in recent sessions to meet month-end obligations.
“Lots of selling from state-run banks was seen at around 53.30 ... it has to be the RBI, no one else would sell like this," a senior dealer with a foreign bank said.
In recent sessions RBI has imposed curbs on banks’ trading limits to help rein in speculation on the currency, which hit a record low of 54.30 on 15 December, were also keeping volumes low in the local forex market, they said.
“It (RBI intervention) seems to have worked so far, but nobody’s jumping to buy the INR, just more cautious shorting it," said Chin Thio, senior FX strategist, BNP Paribas in Singapore.
“(Rupee will remain weak for the) same reasons that brought it here - large current account deficit, worsening fiscal deficit and capital outflows," Thio said, who sees rupee at 52 to the dollar at the end of first quarter 2012.
Shares shed 0.9% in thin trade on Wednesday, a day before monthly derivatives contracts expiry, dragged by a sell-off in banks, on worries over worsening asset quality and slowing credit growth.
“Equity outflows is causing problem in a market where sentiment is already negative," a senior trader with a foreign bank said.
Traders said oil and defence related dollar buying was persistent during the day.
Traders said the overall turnover in the dollar-rupee market has been lower than the usual $2 billion to $3 billion in recent sessions given banks’ reluctance to take bulky positions ahead of the quarter end.
One-month offshore non-deliverable forward contracts were quoted at 52.97.
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 traded around 53.50, with the total volume at $3.4 billion.
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