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Rediff News  All News  » Business » Rupee gains tracking peers; dolllar demand stays strong

Rupee gains tracking peers; dolllar demand stays strong

Last updated on: August 05, 2013 18:33 IST

Rupee graphicThe Indian rupee strengthened slightly on Monday, recovering from its biggest weekly fall in nearly two years as weaker-than-expected US. jobs data boosted Asian risk currencies, while dollar selling by foreign banks also helped.

Still, traders say the currency is at risk of hitting a record low as early as this week, given continued concerns about the efficacy of the central bank's measures to protect the rupee by tightening the domestic cash conditions launched in mid-July.

Not only is the rupee still not far from the record low of 61.21 hit on July 8, signs of government spending have improved liquidity, running counter to the Reserve Bank of India's goal of draining cash, traders said.

The prospect of further rupee falls is leading traders to expect additional measures from the RBI.

Standatd Chartered Bank expects the RBI to announce more measures to tighten cash conditions if the improvement in cash situation continues.

"We could see a record low on the rupee in this week as there is no respite in sight," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

"The range would really depend on the RBI," he said.

The central bank is suspected to have intervened whenever the rupee tried

to inch close to the record low last week, but it has clearly stated it does not protect any particular level on the currency and intervenes only to smoothen volatility.

Traders broadly expect the pair to hold in a 60.50 to 61.50 per dollar range during the holiday-shortened week.

Financial markets will be closed on Friday for a religious holiday.

The partially convertible rupee closed at 60.88/89 per dollar compared with 61.10/11 on Friday.

It moved in a range of 60.72 to 61.05 during the session.

Traders will continue to monitor comments from policymakers for near-term direction along with global cues.

Asian currencies rose on Monday on data showing US employers slowed their pace of hiring in July, which analysts say could make the Federal Reserve more cautious over scaling back its bond-buying programme.

Dollar sales from foreign banks also helped the rupee, although some of the impact was absorbed by greenback demand from importers and oil firms, especially late in the trading session.

In the offshore non-deliverable forwards, the one-month contract was at 61.47 while the three-month was at 62.34.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 61.27 with a total traded volume of $2.2 billion.

Swati Bhat in Mumbai
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