Support for the local currency also came from dollar sales by exporters and some banks after the central bank took steps on Wednesday to stem rupees fall.
Prime Minister Manmohan Singh said, Sudden decline in exchange rate is certainly a shock, but we will address this through other measures, not through capital controls or by reversing reforms. At the same time, he said, to some extent depreciation can be good for the economy as this will help to increase our export competitiveness and discourage imports.
Singh was confident growth in this fiscal will rise to 5.5% from a decades low of 5% in 2012-13. At the interbank foreign exchange market, the local currency resumed at 67 from the previous close of 66.55 and dropped to a low of 67.43 on initial hesitancy in domestic stocks. It rebounded on dollar selling to settle at the days high of 65.70, a rise of 85 paise or 1.28%.
The sharp gains in rupee were mostly attributed to RBI intervention and PMs speech, said Abhishek Goenka, CEO of India Forex Advisors. The rupee was getting support from the strong positive closing in the stock markets.
The gains came a day after the battered local currency posted its biggest single-day rise in at least 15 years as the Reserve Bank of India allowed state-owned oil refiners, the biggest buyers of dollars, to purchase foreign-exchange through a special forex swap facility.
The central bank was also seen selling dollars twice in a day via state-run banks, which further helped the rupee, said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).
Forward dollar premiums recovered on fresh payments from banks and corporates. The benchmark six-month forward dollar premium payable in January rose to 221-225 paise from the previous close of 214-219 paise. Far-forward contracts maturing in July firmed up to 410-415 paise from 393-398 paise.
Govt to announce more steps to prop up Rupee: Takru
The government is likely to announce further measures to prop up the rupee, said finance secretary Rajiv Takru. Dont think we need to get terribly agitated and contribute further to this false sense of crisis which appears to be permeating the atmosphere. So let us just wait and watch for some time, you will see some things which will make you happy very soon, he said. Takru stated that the current depreciation in rupee was not reflective of the weakness in economy and that the currency was heavily undervalued at the moment.