The Reserve Bank of India was suspected selling dollars in late trade via state-run banks from around 59.50 levels to push up the rupee, several dealers said. The rupees weakness, in spite of strong steps taken by the RBI late on Monday to support the currency, shows demand for dollars remains strong, overriding the central banks attempt to stamp down on speculation.
The government relaxed foreign direct investment (FDI) rules on Tuesday in a broad swath of industries including telecoms, to prop up a sliding currency and increase confidence about the record high current account deficit. Yet, investors feel that such measures will take time to take effect and would not yield immediate inflows.
The rupee has barely gained since the central banks steps and the governments FDI measures. The reversal of tide can happen when real flows come into the market through an overseas bond sale, said Param Sarma, chief executive at NSP Forex.
The rupee closed at 59.34/35 per dollar, against its previous close of 59.31/32. It rose to 59.05 in early trade on the governments steps but later fell to as low as 59.57. The rupee has gained only 0.9% since the close of trade on Monday after which the central bank resorted to indirect monetary tightening, but the bonds and rate markets have been roiled.
In the offshore non-deliverable forwards, the one-month contract was at 59.69 while the three-month was at 60.53. In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 59.60 with a total traded volume of $2.6 billion.