Rupee at 2-month high

Currency ends at 61.14; RBI withdraws special window for OMCs

The rupee ended at a two-month high on Monday after opening the day at a four-month high, riding on positive sentiments in the equity market that resulted in dollar flows from foreign investors.

The currency ended at 61.14 compared with the previous close of 61.42 a dollar. It had ended at 61.08 on October 11. On Monday, the rupee opened at 60.86 and during intra-day trades, touched a high of 60.85 and a low of 61.21 a dollar. It had ended at 60.81 on August 6.

According to currency dealers, during intra-day trades, the rupee came off because state-run banks were buying dollars on behalf of oil marketing companies (OMCs). “This may continue even tomorrow (Tuesday) due to which the rupee may trade in the range of 60.80 to 61.50,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.

Encouraged by the stability of the rupee, the Reserve Bank of India (RBI) withdrew the special window, which was made available to state-run OMCs to source their dollar requirements on November 30, and due to which these OMCs were meeting their requirements from the market.

“The pent-up demand for dollars from OMCs and unhedged imports/foreign currency loans is huge, while RBI has the need to cover their forward short dollar book used for intervention and buy fresh to add to its reserves. Until the current account deficit issues are completely resolved, there is need to keep the rupee exchange rate attractive for exporters and off-shore investors. There are external headwinds from quantitative easing taper. The political uncertainty in 2014 still remains valid. Given the mixed signals, there is no guarantee for sustainable rupee gains till mid-2014. The trading range for the rupee could be between 60.50 and 63.50 and a break-out either way is difficult to sustain for long,” said J Moses Harding, group chief executive officer, Srei Infrastructure Finance.

According to Harding, the immediate resistance zone for the rupee is seen at 60.85-61.10 a dollar.

RBI's foreign exchange reserves are currently at a comfortable position and hence, the Street is convinced the rupee may not weaken significantly from its current levels in the near term.