RBI measures prop up rupee; closes up 42 paise

The rupee on Thursday rose by a whopping 94 paise to trade below 52 level intra-day after a string of actions by RBI, but only to pare some of the gains to close at 53.42 against dollar.

The rupee had a weak opening after closing at all-time low of 53.84 yesterday. It rose to 52.90 level intra-day as there was increased selling of dollar by banks and exporters following RBI measures.

Treasury managers in banks said there was also suspected intervention by RBI in the forex market.

However, the domestic unit lost some of the gains and finally settled at 53.42, up by 42 paise over the prevoius close.

“Initially, there seemed to be some kind of intervention from RBI, which we heard from the market. After that the notification regarding the Exchange Earners’ Foreign Currency Account (EEFC) came, which lifted the currency,” Mr T S Srinivasan, GM (Treasury) of Indian Overseas Bank, said.

Talking about near-term outlook, he said that 54 level would act as strong resistance level going ahead.

In order to arrest the declining value of the rupee, RBI today asked exporters to sell 50 per cent of their retained foreign exchange earning. The central bank has also fixed limit for intra-day trading of foreign currency by banks.

Mr P Rajaram Karanth, GM (Treasury) of Corporation Bank said, “There was some kind of intervention from RBI in the morning .. EEFC circular helped in arresting the weakness in the domestic currency,” he said.

“As there will be net addition of around $2.5 billion in the system in a fortnight due to EEFC measures, I hope, breaching Rs 54 level seems difficult in the near-term.”

On RBI steps, India Forex Advisors chief executive Mr Abhishek Goenka said, “With this, the RBI is clearly indicating that it does not want to sell the dollar to support the local unit but it prefers policy level actions.”

The rupee premium for the forward dollar declined sharply on fresh receivings by exporters.

The benchmark six-month forward dollar premium payable in October closed down at 160-162 paise from last close of 172-174 paise and far-farward contracts maturing in April also settled weak at 277-279 paise from 304-306 paise previously.

The RBI fixed the reference rate for the US dollar at 53.3375 and for euro at 69.0680.

The Reserve Bank in a statement said, “On a review of the scheme, it has been decided that 50 per cent of the balances in the Exchange Earners’ Foreign Currency Account (EEFC) accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder.”

RBI also tightened norms for utilisation of the foreign currency fixed deposit funds to check outflow of forex.

The fund could be used by banks for lending to only those entities with risk management policy for managing the exchange rate volatility.

In Asian trade, euro held firm against the dollar and Japanese yen. Oil prices fell on signs of weakening demand in the US and growing concerns over the eurozone.

The BSE benchmark Sensex today closed down by 59.53 points, or 0.36 per cent.

The rupee recovered to end at 86.39 against the pound sterling from yesterday’s close of 86.74 and also shot up against the euro to finished at 69.16 from 69.82.

It too firmed up against the Japanese yen to 66.97 per 100 yen from last close of 67.77.