Rupee strengthens as RBI sells dollar
3 Jul, 2008, 0220 hrs IST, ET Bureau
MUMBAI: Dollar-selling by the Reserve Bank of India (RBI) amid slackening demand from oil companies and foreign banks saw the rupee strengthen on Wednesday.
The local currency ended the day at 43.17/18 against the dollar, appreciating from its previous close of 43.34/36. The rupee had seen a sharp fall of over 30 paise on Tuesday in the absence of central bank intervention.
However, nationalised banks were seen selling dollars from the beginning of trade on Wednesday. “There was hardly any dollar demand with the gap between rates in the market for non-deliverable forwards (NDF) and spot rates coming down considerably,” said a trader with a private bank.
Over the past few weeks, foreign banks have been buying dollars in the spot market while simultaneously selling dollars in the overseas non-deliverable forwards (NDF) market, where the rupee was much weaker. Also, strong gains in the stock market strengthened sentiment for the local unit. The rupee rose to an intra-day high of 43.13 per dollar, as some exporters were selling dollars as well.
According to market participants, the rupee is likely to remain in the 43.10-30 region for the rest of the week, even as the central bank does not seem to be targeting a particular level.
Premia on near-term forward contracts dipped, with the one-month contract ending the day at 7.38% (8%). The six-month contract slipped to 4.94% (5.47%) while the annual contract ended the day at 4.24% (4.57%).
Meanwhile, the bond market saw minimal participation with traded volumes at less than Rs 100 crore. Yield on the 10-year benchmark bond, the 8.24% bond maturing in 2018, ended the day at 8.79%, rising from its previous close of 8.75%.
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