The rupee closed sharply higher on Wednesday, cooling off from all time lows registered in recent sessions. The rupee rose 51 paise against the greenback to settle at 72.19 for the day, marking its biggest single-day rise since May 25. Suspected intervention by the Reserve Bank of India and weakness in the dollar overseas led to a rebound in the currency, say analysts. The Finance Ministry said the government and the central bank “will do everything” to ensure that rupee does not slide to “unreasonable levels”. However, the rupee is still down more than 13 per cent against the US dollar so far this year, cementing its position as the worst performing Asian currency.
Here are 10 things to know:
1. The rupee moved in wide range marked with a 102-paise swing against the US dollar during Wednesday’s session amid choppy trade.
2. At the day’s lowest point, the rupee registered a fresh life-time low of 72.92 against the American currency.
3. Talk of possible fiscal and monetary steps to stabilise the currency and comments from a government official that the slide was overdone led to the recovery, news agency Reuters reported.
4. There was no fundamental rationale for the rupee to depreciate to the low levels of the previous session, Economic Affairs Secretary Subhash Garg said on microblogging site Twitter.
“It (rupee fall) reflected overreaction of market operators. Government and RBI will do everything to ensure that rupee does not slide to unreasonable levels. Today’s correction seems to reflect that realisation,” he said.
5. The comments further propped up the currency as intermittent dollar sales by the Reserve Bank of India through state-run banks continued to underpin sentiment, news agency Reuters cited dealers as saying.
6. “There has been talk of a rate hike since yesterday,” the agency cited a senior trader at a private bank as saying. “The comments today have given some hope to the market that the RBI may do something, but the broader trend for the rupee continues to be downward.”
7. Analysts expect the rupee to continue in a weak trade going forward.
8. “The current weakness in the rupee requires a combination of policy level and market level intervention. Market level intervention alone will only address the volatility but is not likely to lead to any reversal of the trend,” said Salil Datar, CEO and executive director, Essel Finance VKC Forex.
9. Consumer inflation eased to 3.69 per cent in August, below the Reserve Bank of India’s medium-term target of 4 per cent, according to official data released post-market hours on Wednesday.
10. The markets will be closed on Thursday for the Ganesh Chaturthi festival
