Rupee at two-month high due to RBI intervention

The rupee touched a near two-month high of 61.48 against the dollar in intra-day trades before closing at 62.07 due to dollar buying by state-run banks acting on behalf of the central bank. The appreciation of the rupee was due to bullish equities which was triggered after a surprise rate cut by the Reserve Bank of India on Thursday.

The rate cut of 25 basis points was announced before market hours and the rupee had opened at 61.89 compared with previous close of 62.19 per dollar. The rupee had ended at 61.42 on November 5.

“The appreciation in rupee was limited and towards the end of the session the rupee ended above the 62 levels for the spot as RBI had apparently bought dollars in the spot market to curb the rupee’s gains,” said Suresh Nair, director, Admisi Forex India.

Through dollar buying RBI has been building foreign exchange reserves. Latest RBI data shows that foreign exchange reserves fell by $ 471.4 million for the week ending January 2 to $319.2 billion.

Currency dealers do not expect significant strengthening in the rupee despite foreign flows continuing in domestic markets as month-end dollar demand from importers will begin from next week and besides that RBI will keep a close watch on the rupee.