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Dollar buying by the Reserve Bank of India (RBI) through nationalised banks is keeping the rupee' exchange rate down.
Indian markets have been attracting dollar flows from foreign investors and RBI has been absorbing these. Experts believe the rupee could even touch a level close to 63 a dollar, as oil marketing companies have also been buying dollars, to build their oil reserves amid easing prices.
The rupee ended at near a 10-month low on Thursday at 62.35 to a dollar, compared with Wednesday's 62.02. During intra-day trade, it had touched a low of 62.36, after having opened at 62.17. The rupee had ended at 62.44 on February 13.
RBI’s net dollar purchases from the market almost doubled in October to $2.7 billion, compared with $1.44 bn in September. It had, though, been even higher earlier, such as in July at $5.45 bn.
RBI’s foreign exchange reserves rose by $1.43 bn for the week ending November 28 to $316.31 bn.
“A minor depreciation in the rupee will be welcomed by the central bank, to support exports. Till end-December, the rupee might trade at 62-63 a dollar,” said Ashutosh Khajuria, president (treasury), Federal Bank.
Current account deficit widened to 2.1 per cent of gross domestic product in the July-September quarter, higher than both the previous quarter and a year earlier, the RBI said on Monday. RBI governor Raghuram Rajan who was speaking at a news conference after the central bank's board meeting today in Kolkata said risks remain to the current account deficit even though he was not apprehensive about it.
"Over the near term, we expect rupee to continue in a path of slow depreciation against the dollar. With 61.60/90 acting as a support we can expect an eventual move towards 62.50/60 levels on spot," said Anindya Banerjee, currency analyst, Kotak Securities.
