BackRupee stalls at 2009 highs; RBI intervention seen
Rupee stalls at 2009 highs; RBI intervention seen
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Mumbai: The rupee was stopped at its 2009 highs on Monday by suspected Reserve Bank of India (RBI) intervention, but sentiment remained positive due to sharp dollar losses overseas and further gains in local shares.
The partially convertible rupee closed at Rs46.94/95 per dollar, 0.4% stronger than its previous close of Rs47.11/12. It had risen as high as Rs46.89, its strongest since 19 December..
The rupee had run up in morning trade but was then restrained by dollar demand from state-run banks, who traders said appeared to be acting on behalf of the Reserve Bank of India (RBI).
“It’s just a temporary fight, with the final knock-out punch yet to come. Ultimately the dollar-rupee will move down only," said Ashtosh Raina, head of forex trading at HDFC Bank.
Three traders estimated the central bank (RBI) had purchased about $400 to $600 million during the session.
“There was RBI buying at around 46.90 levels. Had that stopped, then it could have appreciated towards 46.75 levels," said PV Shreedharan, chief dealer with Development Credit Bank.
The central bank has previously said it buys or sells dollars in the market to prevent excessive volatility in the rupee.
At the high of Rs46.89, the rupee was up more than 2% in the past four sessions and had gained more than 11% from its record low of Rs52.2, touched in early March.
The domestic stocks rose 1.5% on Monday to their highest close in almost nine months, as manufacturing activity in Asia’s third-largest economy expanded for a second month in May on the back of a revival in domestic demand.
Heavy inflows into shares have been a key driver of the rupee’s rise since March. Foreign investors have pumped a net $4.4 billion into local shares so far in 2009, after having pulled out a record of more than $13 billion last year.
Dealers said a one-third annual drop in exports was a slight negative for the currency, but it was not an unexpected figure and was heavily outweighed by positive factors.
India’s exports fell 33.2% in April from a year earlier to $10.74 billion, a seventh straight fall, and the trade secretary said exports would to decline until September.
Traders said sharp losses in the dollar was boosting rupee sentiment. The dollar tumbled to its lowest so far this year against a basket of currencies as optimism that the global economy was on the road to recovery continued to boost riskier assets.
“The rupee is in a strengthening mode, the dollar is losing everywhere, even in India things are looking good post-elections, so the rupee is also catching up," DCB’s Shreedharan said, adding the central bank would avoid sharp appreciation and let the rupee rise only gradually.
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