Rupee wiped out initial losses on Tuesday and closed eight paise higher at 61.19 against the dollar as the government announced additional steps to curb the widening current account deficit.
Sustained capital inflows and fresh dollar sales by exporters also supported the rupee. The rupee opened lower at 61.39 a dollar from the previous close of 61.27 at the Interbank Foreign Exchange Market and dipped to a low of 61.66 on early weakness after data late on Monday showed the Index of Industrial Production contracted in June.
After imports duty on gold and silver were increased, the currency bounced back to a high of 60.97 before ending at 61.19, a rise of eight paise or 0.13%. On Monday, it had dropped 39 paise or 0.64%.
The government on Monday increased customs duty on gold, silver and platinum to 10% in a bid to curb surging imports and the burgeoning CAD. “The government is seen taking every possible step to stem the fall in rupee and reduce the widening CAD," said Abhishek Goenka, founder & CEO of India Forex Advisors.
“Today, it announced a hike in import duty of gold, which will help reduce CAD and thereby support the sinking rupee." Foreign institutional investors bought shares worth a net R408.35 crore on Monday, as per provisional data with the stock exchanges.
Dollar index was up 0.14% against a basket of six major currencies. “The trading range for the spot USD/INR pair is expected to be within 60.70 to 61.70,” said Pramit Brahmbhatt, Alpari Financial Services (India) CEO.