 "Rupee at one-month low, time for RBI to intervene?")
The rupee dropped to its weakest level in more than a month on Monday due to dollar demand from importers and a fall in local shares, prompting traders to lookout for possible intervention by the central bank to limit the currency’s fall.
At 10:44 am (0514 GMT), the rupee was at 49.74/75 to the dollar, after dipping to 49.8175, a level last seen on January 27, according to Reuters data. The currency had closed at 49.50/51 on Friday.
“Traders are wary of intervention from the Reserve Bank of India; so despite the current selling pressure on the rupee, the fall may be gradual,” said a foreign exchange dealer with a state-run bank.
[caption id=“attachment_234200” align=“alignleft” width=“380” caption=“Many dealers expect the central bank to supply dollars if the rupee closes in on the 50 level.”]
[/caption]
Many dealers expect the central bank to supply dollars if the rupee closes in on the 50 level.
The RBI has actively participated in the local currency market over the last few months, selling dollars while simultaneously resorting to a flurry of steps aimed at cutting speculation and improving dollar inflows.
Data released by the central bank last month showed it sold more than $9 billion in the spot and forwards markets in December, its biggest intervention in nearly three-and-half years.
The rupee, which had erased around 16 percent of its value against the dollar in 2011, has rebounded by over 6.5 percent so far this year, primarily due to the strong foreign investor appetite for Indian shares and debt, where they have invested more than $12.5 billion.
Nonetheless, the tepid response to the government’s $2.5 billion stake sale in ONGC last week has raised doubts about the continuation of the dollar inflows, traders said. One-month offshore non-deliverable forward contracts were at 50.21.
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 were all around 50.02, on a total volume of $1.07 billion.
Reuters