The rupee gained for the first time in four days on Monday, appreciating 39 paise to 61.73 against the dollar, amid indications the RBI had stepped in to support the local currency after a spate of weak economic data.
The rupee also rose on fresh dollar sales as the US currency weakened overseas before the Federal Reserve meeting.
The local currency recovered from early losses even as government data showed wholesale price index (WPI) inflation climbed to a 14-month high of 7.52 per cent in November, strengthening chances of a rate hike by the Reserve Bank at its policy review meeting on Wednesday.
Fresh capital outflows and weak local equities failed to negatively affect the rupee, a Forex dealer said.
At the interbank foreign exchange market, the rupee opened lower at 62.15 a dollar from Friday’s close of 62.12 and declined further to 62.24 amid hesitancy in local stocks and dollar demand from importers.
It recovered as exporters and some banks sold dollars to settle at the day’s high of 61.73, a rise of 39 paise or 0.63 per cent.
“Rupee was seen giving a muted reaction to the poor WPI data released today as RBI was seen selling dollars in the market. The central bank is seen coming to the rescue as economic indicators are trying to put pressure on the rupee,” said Abhishek Goenka, CEO of India Forex Advisors.
Retail inflation soared to 11.24 per cent last month, while factory output contracted 1.8 per cent in October.
The 30-share benchmark S&P BSE Sensex declined for the fifth day in a row and lost 56 points. Overseas investors pulled out a net Rs. 432.02 crore from stocks last Friday, according to provisional data with the stock exchanges.
The dollar index was down 0.21 per cent against a basket of six major global rivals ahead of the Federal Reserve meeting starting tomorrow. The Fed may indicate when it will tapering its stimulus programme.
“Rupee appreciated by over half per cent mainly taking cues from dollar index which is trading weak for the second consecutive day,” said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).
Forward dollar premiums closed with slight changes. The benchmark six-month forward dollar premium payable in May softened to 245 to 247-1/2 paise from 246-248 paise previously, while far-forward contracts maturing in November edged up to 490-492 paise from 489-491 paise.
The RBI fixed the reference rate for the dollar at 62.1024 and for the euro at 85.4284.
The rupee improved further to 100.74 against the pound from last Friday’s close of 101.14 and recovered to 85.11 against the euro from 85.31.
It fell to 59.93 per 100 Japanese yen from 59.92.