Mumbai, Aug. 23: After being on the backfoot for the past six sessions, the rupee today staged a massive comeback against the dollar because of the intervention by the Reserve Bank of India.
Statements by finance minister P. Chidambaram and RBI governor Duvvuri Subbarao on Thursday also helped to temper the bearish sentiments.
Meanwhile, the RBI today bought 78 per cent of its planned Rs 8,000-crore government securities from the market as some dealers offered to sell below the prevailing market rate. The benchmark 10-year bonds were traded in the range of 8.21-8.34 per cent.
A rally in the equity markets also worked in favour of the domestic currency. The BSE Sensex today gained over 206 points to close at 18519.44.
The domestic unit surged 135 paise against the US greenback to close at 63.20, its second-biggest rise in a decade in absolute terms. Forex circles said the rupee was also helped by a rally in currencies such as the Brazilian Real, Malaysian Ringitt and South African Rand against the dollar.
Today’s strong rally caps an eventful week that saw the rupee plunging more than 6 per cent to touch record lows. So far this year, the rupee has dropped around 20 per cent, making it one of the worst performing Asian currency.
After opening higher at 64.30 today, the rupee fell to a low of 64.75 on initial weakness in equities. It rebounded at the fag end to settle at 63.20, a rise of 135 paise, or 2.09 per cent. It had gained 152 paise, or 3.08 per cent, on May 18, 2009.
Dealing room circles said one of the key reasons behind today’s rally was the repeated intervention by the RBI. They added that determined selling of dollars through PSU banks led to corporate houses unwinding long positions.
Chidambaram and Subbarao also helped to boost setiments. The finance minister had yesterday said the rupee was undervalued and had overshot appropriate levels but said there was no need for unwarranted pessimism. Subbarao had said the RBI would continue its liquidity tightening steps till stability was restored in the forex markets.
“Overall the dollar-rupee pair is in a bullish trend. However, the indicators are trading in the overbought region, signalling a possible correction in the pair. If it sustains below 64 levels on a consistent note, we might see a correction towards 62.80-62.60 levels’’ India Forex Advisors said.