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Rupee snaps nine-week losing streak; RBI to the rescue

Source : REUTERS
Last Updated: Fri, Jul 12, 2013 12:04 hrs
Cashier counts currency notes inside bank in Lucknow

The Indian rupee rebounded in late trade on Friday boosted by dollar selling by state-run banks, likely on behalf of the Reserve Bank of India, which helped the local unit snap a nine-week losing streak.

Earlier in the day, heavy dollar demand from importers, particularly oil refiners, had pushed the rupee below the psychological 60-per-dollar mark, which prompted likely central bank intervention.

The rupee gained 1.1 percent on the week on the back of intermittent dollar selling by the central bank through the week and dovish comments from the Federal Reserve chief on monetary stimulus on Wednesday.



Traders said the central bank likely sold dollars via state-run banks starting at around 60.10 levels.

Investors will take opening cues from the industrial output and consumer price inflation data due after market hours on Friday for near-term direction.

The wholesale price-based inflation data due on Monday will also be a key data point ahead of the central bank's policy review on July 30, though most investors are positioned for a no-change in rates.

"It will be another few weeks until we get a clear picture from the Fed FOMC on July 31, particularly the road-map. Once that is done, we get some more outflows that will last until end September," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur.

"We however seem to have seen the bottom for the rupee. It's been beaten down severely and there is very little scope to start selling the rupee again. We may revisit levels around 60 again but that should be it," he added.

The partially convertible rupee closed at 59.56/57 per dollar compared to 59.6750/6850 on Thursday. The unit had hit a record low of 61.21 on Monday.

India's trade deficit narrowed in June to $12.24 billion from a 7-month high, helped by a slowdown in gold imports, which should ease pressure on the current account balance and the rupee.

The data however was largely factored in and failed to have much impact on markets, with investors looking forward to sustainability of the data rather than a one-off fall.

In the offshore non-deliverable forwards, the one-month contract was at 59.96 while the three-month was at 60.66.

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 all closed at around 60.07 with a total traded volume of $2.56 billion.

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