The rupee closed within a whisker of the psychologically crucial 80 per dollar mark on Wednesday. Sustained dollar sales by the Reserve Bank of India ensured that it ended below 80.
The Indian unit closed at 79.99 per dollar, 5 paise weaker vis-a-vis previous close of 79.94.
The rupee did not breach the 80-mark despite persistent demand for the greenback from oil marketing companies and importers due to strong intervention in the market by RBI through state-owned banks.
The rupee had breached 80-mark intraday for the first time on Tuesday during official trading hours, touching a low of 80.06 per dollar.
Besides RBI intervention, decline in the Dollar Index (DXY) in the backdrop of expectation that the European Central Bank (ECB) may up its benchmark rates by up to 50 basis points, supported the rupee, which moved in a tight band of 79.9175 to 79.9925 per dollar.
Anindya Banerjee, Vice-President, Kotak Securities Ltd, said: “USD-INR spot closed 5 paise higher at 79.99, high of the day. Demand for USD from oil marketing companies and weakness in yuan added to the demand for USD-INR.
“Over the near term, we expect USD-INR to trade with an upward bias, driven by fragile global risk sentiments. We could see a range of 79.60 and 80.40 on spot.”
Forex dealers say the RBI is doing as much as possible to delay the inevitable — of the rupee closing above 80 per dollar level in the backdrop of rising interest rates in the US, FPI related outflows and widening trade deficit.
The exchange rate policy of the central bank is governed by the need to reduce excess volatility.
Published on
July 20, 2022