The rupee, Asia's second-best performer this year, ended three days of gains on speculation the central bank is selling the currency to protect exporters. | |
| Slower inflation may be encouraging the Reserve Bank of India to step up dollar purchases to stem rupee gains, said Rohan Lasrado, a trader at HDFC Bank in Mumbai. The government last week announced steps to cushion small exporters from a stronger currency, which rose 9.6 percent this year. |
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| "It's very difficult to gauge what levels they have in mind for the rupee, but their resolve to hold it steady for the moment is clear,'' Lasrado said. "`With the central bank mopping up the capital flows, there's a fairly even interest on both the buy and the sell side to keep the rupee steady.'' |
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| The rupee fell 0.1 per cent to 40.4025 against the dollar at the 5 pm close of trading in Mumbai, from 40.365 yesterday, according to data compiled by Bloomberg. |
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| The central bank, which releases data on its dollar purchases with a delay, this week said it bought $4.43 billion in May, the most in three months. Foreign-currency reserves have risen by about $6.6 billion in June and up to July 6, suggesting more purchases. |
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| The federal government last week handed out a relief package to exporters of leather goods, textiles and handicrafts, because a stronger rupee threatened to slow exports and cut jobs. |
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| "Given the fact that more people are in the goods sector, the human aspects of exchange-rate management should not be lost sight of,'' central bank Deputy Governor Rakesh Mohan said in a speech delivered at Banque de France on June 14. |
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| The Reserve Bank may have condoned the rupee appreciation this year on speculation it helped tame inflation that accelerated to a two-year high in January. The rate dropped to a 13 1/2-month low of 4.03 per cent in the week ended June 16 and now may allow the central bank to intervene. Central bank sales add currency to the banking system, fueling inflation. It today sold Rs 50 billion ($1.2 billion) of two-year bonds to mop up part of the surplus cash. |
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