Published — Friday 5 July 2013
Last update 5 July 2013 2:58 am
MUMBAI: The Indian rupee eked out minor gains yesterday, snapping three sessions of losses, but sentiment was dented after the Reserve Bank of India chief said the bank would not defend any particular exchange rate, which dealers read as likely absence of any heavy intervention.
RBI chief Duvvuri Subbarao’s comments on the exchange rate, which would be read as innocuous in other circumstances, led to a sharp sell-off in the rupee, which the market took as a signal that any significant intervention was unlikely despite the currency hovering near record lows.
The absence of any strong comments from the governor to support the rupee was also a dampener for the markets, dealers said.
The rupee is likely to take its next cue from the US non-farm payrolls data, due today, which will be an important data point for the Federal Reserve’s decision to slow down its bond purchases.
“The RBI governor’s comments on not protecting any particular rupee levels and concerns on the deficit did not go down well with the currency market,” said Uday Bhatt, a senior manager at UCO Bank. “The non-farm payrolls data will be the key. If it’s strong, the rupee may see 61 levels.”
The rupee was supported by a strong stock performance with local stocks gaining 1.2 percent.
The partially convertible rupee closed at 60.13/14, compared with its previous close of 60.215/225. It fell to as much as 60.38 after the governor’s comments.
The battered Indian rupee will remain under pressure against the US dollar over the next year as a wide current account deficit and policy inaction dissuades foreign investment into the country, a Reuters poll showed.
In the offshore non-deliverable forward PNDF, the one-month contract was at 60.51, while the three-month was at 61.21.
In the currency futures market INRFUTURES, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 60.46 with a total traded volume of $ 4.9 billion.
The battered rupee will remain under pressure against the US dollar over the next year as a wide current account deficit and policy inaction dissuades foreign investment into the country, a Reuters poll showed.
The rupee is expected to trade at 59.0 in a month and 58.0 in six months, before reaching 57.5 in a year from now. That would be just over 4 percent stronger than the 60.0 it was trading at earlier yesterday.
Still, that would mark only a modest rebound for emerging Asia’s worst performing currency so far in 2013.
The rupee has lost over 8 percent so far this year and has practically been on a one-way street since mid-2011. It hit an all-time low of 60.76 last week.