Massive intervention by the Reserve Bank of India on Friday reversed the trend and took the rupee back to near about Thursday?s opening level of 40 a dollar. On Thursday, the rupee opened at 40.05/07 to the dollar but closed at 39.87/88.
Friday?s depreciation of the currency was short-lived and at the close of the Mumbai market at 5 pm, hectic short covering pushed the rupee to 39.90/91, marginally weaker than its opening level. The narrow range, dealers said, was largely due to RBI support.
Dealers said short covering by a few banks that dumped the US currency earlier in the day on hopes of squaring off at a cheaper rate could be the possible reason for the intense trading towards the close and the rupee?s weakening. For most of the day, the rupee remained range-bound between 39.87/88 and 39.85. The rupee opened near the previous day?s close of 39.87/88 a dollar and gained marginally to 39.85 levels before ending the day at 39.90/91.
?Most banks wanted to square off their positions and did not want to carry forward their open positions due to the uncertain market conditions,?? explained a dealer at a foreign bank. Two major government banks, State Bank of India and Bank of India, were big buyers of dollars. Dealers said that these banks were probably buying on behalf of RBI. The market estimated the RBI?s buying to be $400-500 million.