Re dips on dollar buys of oil firms, RBI cues

Re dips on dollar buys of oil firms, RBI cues

Mumbai: The rupee eased on Thursday as oil companies bought dollars and fears of intervention by the central bank weighed on sentiment, but trading was muted ahead of Diwali, dealers said. After market hours on Wednesday, the Reserve Bank of India said the limit for issuing intervention bonds had been raised to Rs2.5 trillion from Rs2 trillion.

The partially convertible rupee ended at 39.32/33 per dollar, lower from 39.30/31 at close on Wednesday, when it hit 39.16—its strongest since March 1998.

“Many companies were closed today for Diwali, and there wasn’t much happening for most of the day," a senior dealer with a private bank said.

“Apart from some initial jitters, the market seems to have brushed off the increased MSS ceiling," said the dealer, referring to the so-called market stabilization scheme bonds.

The rupee has gained about 12.5% against the dollar this year, powered by massive capital inflows, many slated for the record-setting stock market. The apex bank bought $40 billion (Rs1.57 trillion) in the first eight months of 2007, and is widely believed to have played an active role in tempering the rupee’s ascent in recent months.

The Sensex ended lower on Thursday though, extending losses into a fourth day, as credit jitters roiled global markets. Still, losses in the rupee were limited as exporters sold dollars, fearing further erosion in the US currency’s value, dealers said.