Rupee retreats from 2 week high, drops 3 paise vs USD

The rupee fell from a two week high to close three paise lower at 59.34 against the dollar, failing to sustain gains driven by the easing of FDI norms in various sectors and the RBI’s liquidity—tightening measures.

Late dollar demand from importers, a strengthening dollar overseas and capital outflows also weighed on the rupee, according to a forex dealer.

The rupee moved in a range of 52 paise on alternate bouts of demand and supply, with confusion over the sustainability of the currency’s stability after the Reserve Bank of India on Monday announced measures to address exchange rate volatility.

At the Interbank Foreign Exchange Market, the rupee opened at 59.14 to a dollar from the previous close of 59.31 and rallied to a two-week high of 59.05 on the back of firm local equities amid sustained dollar selling by exporters.

The rupee later fell to a low of 59.57 on renewed dollar demand from importers and firm dollar overseas before recovering some ground to end at 59.34, a drop of three paise.

On Tuesday, it had gained 58 paise, or 0.97 per cent, following the RBI’s measures.

The benchmark S&P BSE Sensex rose 97.5 points, or 0.49 per cent, on Wednesday. Foreign institutional investors sold Rs 357.40 crore of shares on Tuesday, as per provisional data with the stock exchanges.

The dollar index was up 0.04 per cent ahead of testimony from the head of the Federal Reserve. “Yesterday, Prime Minister Manmohan Singh eased FDI rules for several industries, including insurance and telecom. The markets neglected the news as the changes made in the FDI rules will show results in the long term,” said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).

The spot rupee is expected to trade within 59.10-59.90 levels, Brahmbhatt said.

Meanwhile, the premium for forward dollars dropped on fresh receipts by exporters.

The benchmark six-month forward dollar premium payable in December settled weak at 200-210 paise from Tuesday’s close of 205-215 paise. Far-forward contracts maturing in June dipped to 403-413 paise from 410-420 paise.

The RBI fixed the reference rate for the dollar at 59.3623 and for the euro at 77.9875.

The rupee fell against the pound sterling to 90.35 from the previous close of 89.52 and turned negative to 78.00 per euro from 77.82.

It improved against the Japanese yen to 59.54 per 100 yen from 59.67.

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