BackRupee gains against dollar capped by RBI action
The partially convertible rupee closed stronger at 60.29/30 versus Friday's close of 60.39/40
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Mumbai: The Indian rupee gained against the dollar on Monday, hitting a more than five-week high, as the weaker-than-expected US jobs data raised hopes about additional foreign inflows, although broader gains were capped after the central bank was spotted intervening.
The dollar slipped after data showed US employers added the fewest jobs in eight months in August, eroding confidence in the economy and reviving bets that the US Federal Reserve might leave interest rates near zero for longer than anticipated.
The Fed’s easy monetary stance has sparked big foreign inflows into emerging markets, including India, where overseas funds have bought a net $31.9 billion worth of debt and shares so far this year.
Analysts said the focus will be now on domestic factors such as the consumer inflation data due on Friday as well as the central bank policy review at the end of the month. Still, few expected a significant appreciation in the rupee given the prospect of continued intervention from the Reserve Bank of India (RBI).
“Globally most major events are done. We will have to watch top state-run banks’ action as it seems they are determined to prevent sharp appreciation in the rupee," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.
The partially convertible rupee closed stronger at 60.29/30 versus Friday’s close of 60.39/40.
Chandramgethen expects the rupee to hold in a range of 59.85 to 60.70 for the rest of the week.
Hopes of continued foreign flows helped the rupee climb to 60.20 in early trade, its highest level since 30 July.
But the central bank sold dollars via state-run banks in both the spot and the forward markets to prevent further gains in the rupee, five traders said.
In the offshore non-deliverable forwards, the one-month contract was at 60.58 while the three-month was at 61.18. Reuters
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