Mumbai: The Indian rupee fell sharply on Wednesday, after hitting a fresh 19-month high in early trade, on likely intervention by the Indian central bank, dealers said.
The partially convertible rupee closed at Rs44.54/55 per dollar after hitting Rs44.31, its strongest since 8 September 2008. It had ended at Rs44.45/46 on Tuesday.
The Reserve Bank of India is said to have bought dollars to arrest the sharp rise in the rupee through state-owned banks.
“They had intervened below 44.40. That is why it went down so sharply to 44.58 level,” said a senior treasury official at a state-owned bank.
Dealers said some state-owned banks bought dollars actively, implying the central bank was intervening in the market. The rupee moved in a band of Rs44.31-Rs44.58 in the day.
“The rupee rose in the morning on the China’s yuan news. But there was no flows to support it and stocks were also flat,” said head of foreign exchange market at a foreign bank.
The rupee climbed 2.7% in March, its biggest monthly gain since May 2009, on the back of foreign portfolio inflows of about $4.4 billion, and has strengthened a further 1.3% since then.
The Malaysian ringgit and Taiwan dollar led an extended strong Asian rally on Wednesday, fuelled by speculation China may let the yuan rise in the next few months amid perceived easing of Sino-US tensions over the currency.
India’s main stock index closed marginally up 0.16%, after climbing above 18,000 points for the first time in more than two years on Wednesday.
“The euro has been falling. There was some (dollar) buying by L&T and Reliance Industries. This also led to the rupee’s depreciation,” said a dealer at Union Bank of India.
The rupee is in a consolidation mode now, given the sharp rally in the last few days, said dealers.
The Indian unit may extend its fall on Thursday and open weak given the dollar’s strength against euro, dealers said.
“I expect it to be in the range of 44.55-44.75 tomorrow,” the Union Bank dealer said.
The euro held near a one-week low against the dollar on Wednesday on uncertainty over a proposed Greek aid deal, while the Australian dollar stayed buoyed on expectations of higher interest rates.
The one-year forward dollar premium was at 3.07% compared with 3.01% on Tuesday.
The forward dollar premium had touched 2.84% on Monday, a level seen last on 31 March due to strong exporter sale following the recent rise in the rupee.
One-month offshore non-deliverable forward contracts were at 44.51/61, near the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange ended at 44.6325 and MCX-SX at 44.63, with total volume at $7.64 billion.