The rupee on Wednesday moved in tandem with the stock market sentiment, opening weak with a wide gap of 53 paise at 39.80 to the dollar and touching an intraday low of 39.96.
The rupee on Tuesday had closed at 39.36. The appreciating rupee did a reversal on Wednesday after the stock market regulator called for a feedback on its latest report that aims at curbing overseas capital inflows.
Market dealers felt the new proposal was likely to become a policy soon and there could be a demand for dollars if foreign institutional investors (FII) withdrew from the stock market on panic. This negative sentiment, coupled with heavy selling by exporters pushed up the dollar sharply. ?The selling (of dollars) began when the rupee touched 39.96 to the dollar,? said a chief dealer at a private bank.
There was no intervention by the Reserve Bank of India whose prime concern has only been the unprecedented rising rupee. ?The RBI must be happy now that the dollar has gained on its own without its intervention,? said a dealer at a foreign bank. The rupee, however, began to gain and ended the day at 39.55/56.
Dealers said the rupee started to appreciate after finance minister P Chidambaram made a statement that the government was not banning capital inflows through the FII route but placing a cap on investments routed through participatory notes.