Rupee Rises to below 60 Against Dollar

• State-run Banks Exit Market, RBI Stops Dollar Buying

• FII Demand Rupee in Singapore for Stock Market

The Indian rupee strengthened against the dollar towards the end of the trading hours on Tuesday, 13 May as exporters sold dollars and state-run banks stopped buying the US currency.

At 5pm, the local currency closed at 59.67, up 0.64% from its previous close of 60.05. The rupee had opened at 59.735 a dollar in the morning and strengthened to as much as 59.59 a dollar.

The forward premium for rupee also fell as exporters sold their dollars and cut their hedging positions. Premium for June fell to 60.28 paise from 60.67 paise.

Earlier in the day, the rupee had given up some of its gains against the US dollar on consistent dollar demand from state-owned banks and importers, even as traders took a breather after a brisk day of trading on Monday.

RBI has been actively mopping up dollars from the markets to avoid a sharp appreciation in the rupee, said dealers. Data showed that RBI bought dollars worth $7.78 billion in March. The data which comes with a lag of two months, showed that RBI purchased a total of $8.75 billion in the spot market in March and sold $970 million which meant that the central bank pulled out a net $7.78 billion from the local foreign exchange market.

The dollar buying by the central bank was the highest in three months and the first since December when the RBI had bought a net $3.48 billion from the forex market.

Towards the end of the day though, state-run banks exited the market, currency dealers said. There was some dollar demand from certain firms but that was not as much as that of state owned banks, leading to the closing strength of the domestic currency.

Since January, the rupee has risen 3.57% and is the second gainer in Asia after the Indonesian rupiah.

The dollar index, which measures the US currency’s strength against major global currencies, stood at 80.116, against its previous close of 79.901.

The yield on the 10-year government bond closed at 8.785%, from its previous close of 8.731%. The inter-bank call money rate was trading at 9%.

The rupee rallied to one month high of 59.51 against the American currency on dollar selling by banks and exporters on the back of strong foreign capital inflows into equity market.

The rupee resumed higher 59.98 per dollar as against the last weekend’s level of 60.04 per dollar at the Interbank Foreign Exchange (Forex) Market and firmed up further to more than one-month high at 59.51 per dollar before quoting at 59.62 per dollar at 1000 hrs.

Banks and exporters prefer to reduce their dollar position in view of persistent foreign capital inflows into equity market.

The benchmark Sensex rose to all-time high of 23,410.36 before quoting at 23,281.48 at 1000 hrs, showing a gain of 287.25 points of 1.25 per cent from its last weekend’s level.