Rupee breaches 64-level, recovers after RBI steps in

Despite a heavy battering, the rupee on Tuesday made a smart recovery to close at 63.25 after hitting a fresh low of 64.13 against the US dollar, helped by RBI’s massive intervention.

At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced sharply weak at 63.75 a dollar from overnight close of 63.13. It sank below 64-mark to historic low of 64.13 on sluggish local stocks and continued dollar demand from importers.

However, the rupee later recovered smartly on dollar selling by RBI and exporters. It touched the day's high of 63.15, before settling at a closing low of 63.25, a fall of 12 paise over yesterday's close.

"The RBI was seen selling dollars via state-run banks around the 64.00 levels which helped rupee to trade stable and recover slightly," said Pramit Brahmbhatt, CEO, Alpari Financial Services (India).

Forex dealers said the intra-day movement from the rupee against the dollar from 61.65 to 64.13 was swift.

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"The US dollar was also seen weakening internationally before the FOMC minutes which is due for Wednesday. We will be looking at the July minutes for potential details on the process for tapering as well as the level of conviction within the central bank," said Abhishek Goenka, Founder&CEO, India Forex Advisors.

Experts forecast spot Rupee to fall down further as dollar demand from defence & oil importers will force the local currency to trade near the 64.50 level in coming days.

Meanwhile, the Indian benchmark S&P BSE Sensex today declined by another 61 points while Foreign Institutional Investors (FIIs) sold shares net Rs 680.08 crore yesterday as per provisional data from stock exchanges.

With the rupee breaching the 64 to a dollar mark intra-day, Finance Minister P Chidambaram today held a meeting with top government functionaries, including Prime Minister's key economic advisor C Rangarajan.

Chidambaram, who met top officials for the second day in succession today, may have also discussed the reform measures the government plans to take in the near future and steps that will bring back the economy to high growth path.

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To restrict the outflow of foreign currency, RBI had on August 14 announced stern measures, including curbs on Indian firms investing abroad and on outward remittances by resident Indians.

"Concentrated measures and efforts by the RBI are likely to show an impact in the long run but in the short-term, the rupee is expected to witness a bearish ride," said Dinesh Thakkar, Chairman & Managing Director, Angel Broking.

Meanwhile, forward dollar premiums dropped sharply on fresh receipts by exporters.

The benchmark six-month forward dollar premium payable in January tumbled to 251-254 paise from Monday's close of 270-273 paise. Far-forward contracts maturing in July also plunged to 475-479 paise from 521-525 paise.

The RBI fixed the reference rate for the dollar at 63.7335 and for the euro at 85.0698.

The rupee continued its downslide against the pound sterling and closed at 99.04 against last close of 98.79 and also declined further against the euro to 84.63 from 84.27.

It also slumped against the Japanese yen to 65.05 per 100 yen from last close of 64.44.