The Rupee recovered all its losses, and was trading steady after banks sold Dollars, likely for the Reserve Bank of India, dealers said. Some dealers also cited foreign fund inflows as the reason for the Rupee’s rise. The Rupee had, earlier in the day, hit a record low of 84.77 to a Dollar.
“The RBI has now started selling aggressively, after they were present with mild intervention in the morning,” a dealer with a private bank told Informist. The Rupee was under pressure Tuesday due to the purchase of Dollars by importers, who demanded the greenback, anticipating a further fall in the domestic currency, dealers said.
A strength in the Dollar Index also put pressure on the Indian currency, dealers said. The Dollar Index was strong after data showed slower contraction in the U.S. manufacturing sector. The index, which measures the strength of the greenback against a basket of six major currencies, was 106.41 at 1325 IST against 106.38 on Monday and 105.78 on Friday.
Some dealers told Informist the Rupee gained as foreign banks sold Dollars on behalf of their overseas clients looking to invest in Indian equities. Both the Nifty 50 and the BSE Sensex were up 0.8 per cent at 1430 IST.Â
Before continuous intervention in the spot market on Tuesday, the central bank had also sold Dollars in the offshore non-deliverable forward market to support the Rupee. Before opening at 84.71 a dollar, the Rupee was trading around 84.78 a Dollar in the offshore market.
Dealers expect importers to continue buying Dollars, thus keeping the Rupee under pressure. For the rest of the day, the Rupee is likely to move in a range of 84.60-84.80 against the Dollar. Dealers see strong immediate technical resistance for the Indian unit at 84.60 a Dollar.
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