RBI saves rupee

The rupee recovered off an early low of 46.21 per dollar after the Reserve Bank of India (RBI) stepped in to check the local currency’s...

The rupee recovered off an early low of 46.21 per dollar after the Reserve Bank of India (RBI) stepped in to check the local currency’s fall by selling dollars through state-run banks. The rupee finally closed at 46.00/02 per dollar, a sharp over 10 paise gain from Tuesday’s close of 46.1050/1150.

‘‘The state-run banks stepped in around the 46.20 level and once they had shown that the RBI support would be there around that level, exporters also started selling,’’ a dealer at a state-run bank said.

The rupee has lost 0.5 per cent so far this week, with traders worried that the near-record-high prices of crude oil could widen the trade deficit while simultaneously fanning local inflation higher.

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The rupee posted its biggest single session loss in two months of 0.31 per cent on Tuesday after oil prices scaled a record peak above $50 per barrel, fanning worries about the trade deficit and inflation. Healthy trade and foreign fund inflows spurred a sharp rupee recovery to 45.99, before settling at 46.00/02, dealers said.

RBI uses forex kitty of over $118 bn to control the movement of the rupee.