Bouncing back from its record lows, the rupee on Wednesday gained 60 paise to close at 57.79 against the dollar as rating agency Fitch revised India’s credit outlook to stable and government officials soothed market sentiment with assurance of taking steps to curb the currency’s fall.
Also, heavy dollar selling by some big corporates and US dollar weakening against the euro overseas also aided the rupee, forex dealers said.
The local unit resumed higher at 58.20 against the dollar from Tuesday’s all-time closing low of of 58.39 but fell back to the day’s low of 58.38 at the Interbank Foreign Exchange (Forex) market.
However, it kept improving from there to the day’s high of 57.73 before concluding at 57.79, a rise of 60 paise, or 1.03 per cent. In the last five trading sessions, it had tanked by 195 paise, or 3.45 per cent against the dollar.
“The rupee recovered mainly on soothing comments from Finance Ministry officials and Planning Commission Deputy Chairman Montek Singh Ahluwalia on government taking steps to curb its fall and revision on rating upgrade by Fitch.
“Also, there were reports of some major corporates heavily selling dollars and euro strengthening, which aided rupee’s gains,” said Srinivasa Raghavan, EVP (Treasury), Dhanlaxmi Bank.
Asked about any intervention from RBI to stop rupee’s fall, he replied in the negative, adding that rupee is likely to stabilise to 57 level by this month end.
Taking note of the government’s efforts to contain fiscal deficit, Fitch Ratings today revised India’s Outlook to Stable from Negative and affirmed ‘BBB—’ rating.
Finance Minister P Chidambaram on Wednesday held meeting with top officials and is understood to have discussed steps to check its slide against the US dollar, according to sources.
Also, Planning Commission’s Deputy Chairman Ahluwalia said the government has been taking steps to deal with the economic situation and hoped that forex market will stabilise.
Economic Affairs Secretary Arvind Mayaram had on Tuesday said: “This is a temporary phase. This is simply a correction....”
“The rupee had hit a record low of 58.98 on Tuesday. The intervention by the central bank has helped rupee to post gains today. In addition, the revised outlook of India by Fitch has further contributed to the appreciation in the rupee during the closing hours,” said Abhishek Goenka, Founder and CEO, India Forex Advisors.
During local forex trading hours on Wednesday, the euro hit a three-and-a-half month high against the dollar in early European trade, rising to as high as 1.3335.
Meanwhile, the consumer price index (CPI) based inflation fell to at 9.31 per cent in May as against 9.39 per cent in April while the Index of Industrial Production (IIP) growth slipped to 2 per cent in April from revised 3.4 per cent in last month.
Premium for forward dollar closed with minor changes either side.
Benchmark six-month forward dollar premium payable in November softened to 158-160 paise from Tuesday’s close of 159-160 paise while far-forward contracts maturing in May edged up to 313-315 paise from 312-314 paise.
The RBI fixed the reference rate for the US dollar at 58.2740 and for the euro at 77.5045.
Rupee recovered against pound sterling to 90.44 from last close of 90.79 and also shot up against the euro to 76.69 from 77.53. It also recouped against the Japanese yen to 59.82 per 100 yen from previous close of 60.21.