Rupee fall takes a break

The rupee reversed its seven-session losing streak on Friday as the Reserve Bank of India shed its hands-off policy and intervened heavily in the forex market.

By Our special correspondent in Mumbai
  • Published 8.09.18
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Mumbai: The rupee reversed its seven-session losing streak on Friday as the Reserve Bank of India shed its hands-off policy and intervened heavily in the forex market.

The Indian currency gained 26 paise to end at Rs 71.73 to the dollar against its previous close of Rs 71.99. This is the biggest single-session gain by the rupee against the US greenback since August 20.

The turnaround in the rupee was also aided by dollar supplies from exporters.

The RBI's heavy dollar sale on Friday is in sharp contrast to the central bank's recent stance of allowing the rupee to slide and intervene marginally when it felt appropriate.

Market experts had questioned this role of the RBI as the rupee had fallen around 13 per cent so far this year due to various factors.

In the past seven trading sessions alone, the rupee lost a whopping 189 paise.

While some felt that the central bank was right in letting the rupee depreciate as it was over-valued and the unit's fall was largely on account of external factors, others had batted for a strong intervention given the adverse impact of a sharp fall of the currency on the economy.

The RBI had often said in the past that it did not target any particular exchange rate but was focused on curbing volatility.

Market observers, however, remain divided on the rupee trend with some expecting the currency to stabilise while others fearing it to lose some more ground.

Some feel the rupee could strengthen when trading resumes on Monday as the current account deficit for the first quarter of this fiscal, announced on Friday, is in line with estimates.

Though the currency opened on a positive note at 71.95 on Friday, it soon breached the 72-mark to touch a day's low of 72.04 to the dollar following trade concerns and rising crude prices. However, after the RBI started selling dollars the rupee started recovering and touched a high of 71.65 before closing at 71.73, posting a gain of 26 paise, or 0.36 per cent.

There was some relief for the bond market too with yields on the benchmark 10-year security dipping to 8.03 per cent against the previous close of 8.06 per cent.