Rupee reverses falling trend, rises 1% to 57.79/US$

Moneycontrol Bureau

Finally, the ruffled feathers of the currency market have been somewhat smoothened. The Indian rupee on Wednesday, June 12, rose by 1.03 percent or 60 paisa to close the day's trading at 57.79 against the US dollar. This was the first appreciation after consecutive declines since June 4. It hit an intraday low at 58.38 and a high of 57.72.

Just before the closure, global rating agency Fitch upgraded India's outlook to stable from negative affirming the credit rating at BBB-. This undoubtedly gave a sentimental boost to the exchange rate, bolstering expectation of fresh overseas investment. The local currency had hit record low at 58.98/USD on Tuesday.

"The Reserve Bank of India (RBI) did not intervene today. A group of foreign institutional investors (FIIs) were seen investing in government bonds," a chief dealer from a state-owned bank told moneycontrol.com on conditions of anonymity.

"This led to dollar selling, which in turn helped the local currency gain strength against the US dollar. Dollar buyers are gradually turning sellers. The Fitch outlook upgradation has also added to the sentiment," he said.

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In the last six trading sessions, the local unit tumbled more than 4 percent against the greenback. RBI on Tuesday had intervened in the forex market to halt rupee's decline and was believed to have prompted USD 4 - 5 billion selling via five public sector banks.

The government came out with a series of media statements to calm the nerves of currency market.

Meanwhile, the market is divided over the rupee's near-term direction. Some traders are of opinion that the worst for rupee depreciation is over. It is likely to be range-bound now, hovering around 56. However, others differ, citing status of no improvement in economic parameters.

"RBI intervention and repeated government statements indeed have acted in favour of rupee. However, nothing has changed fundamentally, be it inflation or current account deficit. It will be too early to say that rupee's downfall has stopped. It might go back to 58 level again," said Partha Bhattacharya, deputy CEO, Mecklai Financial (a Mumbai-based forex firm).

According to Phani Shankar, head-financial markets at ING Vysya Bank, the recent pressure on rupee is largely on account of limited supplies and bunched up demand, with the sharp move acting as a further deterrent for potential sellers.

"A period of stability can reverse the sentiment and rupee can see some retracement. It is likely that USD-INR has already hit a high for the near future," he said.

Earlier in the day, the deputy chairman of the Planning Commission Montek Singh  Ahluwalia confirmed RBI's intervention in the currency market to check rupee's slide.

saikat.das@network18online.com