Greece saves Indian rupee temporarily, more on the anvil

On the currency front, the rupee pulled back from its two-year lows, supported by gains in domestic equities and a rebound in the euro. The rupee had earlier plunged to its weakest level in two years on the back of eurozone worries with S&P's downgrade of Italy.

It was quite a pan-Asian panic when Italy was downgraded, reports Latha Venkatesh of CNBC-TV18. There were rumors doing the rounds in several currency desks that Greece will seek a referendum on whether it will stay in the Euro or not. Nothing came on the wires and finally, that rumor died a natural death. But at that point in time, in early morning trade, all currencies across Asia weakened and the dollar strengthened. The Indonesian rupiah and the Korean won fell 1.5% each.
The rupee however did not have such a rapid fall, but it did tumble about 0.5% later, in conjunction with global worries. But as soon as the Indian stock markets started reviving, and more importantly, when Greece paid off its debt, currencies revived strength.
First to revive, of course, was the Euro. From sub 1.36 per dollar levels, it went over the 1.37 mark, which ushered in some strength to Asian currencies too. Rupee was the first among Asian money to recover, also because we had a very strong equity market recovery as well.
It is unconfirmed if FIIs were actually buying shares, and therefore, were selling dollars. If anything, the FIIs were buyers of dollars, which means, they were taking out money from the system. We may probably start to see repercussion of that, but at the moment, the rupee looks like it has recovered from its initial losses. Rs 48.20-48.25 is still a very important support level for the rupee. If for any further European bad news, it gets breached, then it could go up to Rs 49, Venkatesh concludes. Also watch accompanying video for her comments