The rupee was seen at 96.1450 level in early trades, down 17 paise from Monday’s close of 95.9825. It opened weaker at 96.05 level, as renewed surge in crude oil prices deepened concerns over imported inflation.
Persistent intervention by the Reserve Bank of India helped the currency bounce back to 95.95 before closing steady, treasury professionals said.
The RBI has been intervening to prevent the rupee from trading past the 96 level since early this month, but weak global cues forced the central bank to intervene when it went past the key level. The firm dollar index, which gained in tandem with crude price rise, has put added pressure on the local currency.
“The USDINR’s attempts to decisively break above 96 have been thwarted by the central bank’s steady intervention, but upward pressure was relentless on Tuesday in the midst of exogenous triggers,” DBS Bank senior economist Radhika Rao said.
The decline in foreign exchange reserves by $14.9 billion in the week to September 18 is a testament to the regulatory intervention, she said.
“As the rupee could bounce back to 95.98 from the low of 96.15, it could gain from here in the shorter run,” forex consultant KN Dey said. However, economists and market participants are betting on gradual depreciation over a longer one year horizon.The rupee hit a record low of 96.96 against the dollar in late May, prompting the RBI to announce a slew of steps to attract foreign funds. Indian banks could garner $144 billion since early June using dedicated windows, out of which $133 billion came in the form of foreign currency non-resident bank (FCNR-B) deposits.
The rupee recovered to around 94.50 on September 7, but the gains proved short-lived.
