The rupee is off highs as oil-related buying kicks in, but still headed for a third consecutive session of gains. The Indian currency rose to as high as 55.01 earlier, almost breaking below the 55-level for the first time since May 22. A consolidation period is expected after the rupee hit seven consecutive record lows in the previous two weeks. Traders expect the rupee to trade at 54.90-55.30 against the greenback for the session.
The rupee strengthened for a second session on Friday after the Reserve Bank of India stepped in to defend the currency, and exporters and custodian banks were heavy sellers of dollars.
The unit still posted its eight consecutive weekly fall, having hit seven consecutive record lows since May 16. Its latest was on Thursday when it fell to as much as 56.40. The rupee closed at 55.37/38 per dollar after ending at 55.65/66 on Thursday.
The intense risk aversion from the eurozone has severely pressured the currency, but falls have been magnified by concerns about India’s fiscal and economic outlook.
A slight easing of that risk-off sentiment — with the euro inching up from two-year lows against the dollar on Friday — has also helped the rupee recover over the past two sessions.
The RBI is believed to be looking to hold the rupee above the psychologically key level of 56 to the dollar, and has been seen intervening in the rupee forward markets, alongside its defence of the spot rupee.
The rupee has fallen for eight weeks now, its longest losing streak since the 11 weeks of falls that ended in October 2008.