The rupee ended at a four-month high on Tuesday due to dollar flows, as custodian banks sold dollars on behalf of their clients. The appreciation in the currency was despite dollar demand from oil marketing companies (OMCs).
The rupee ended at 61.04 a dollar compared with the previous close of 61.14. The last time the rupee rose to such levels was on August 8, at 60.86 a dollar. It opened at 60.99 a dollar and during intra-day trade, touched a low of 61.29. Since the beginning of this financial year, the currency has weakened 12.45 per cent.
“Foreign banks sold dollars, due to which the rupee strengthened. During the day, OMCs were seen buying dollars. It is estimated OMCs have done a total swap of $15-16 billion with the Reserve Bank of India (RBI), and are looking to unwind as much as possible when the rupee is rallying and before the US Fed’s meeting on December 18, to avoid any negative surprises,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
RBI has purchased (net) $3.93 billion in October — the highest in about five years — compared with a net sale of $3.55 billion in September. RBI had recorded net purchases of $4.33 billion in April 2008, say the latest data released by it.
This is mainly due to the concessional foreign currency non-resident (bank) [FCNR(B)] swap window the central bank offered banks. The swap facility was made available to the banks for incremental FCNR(B) deposits, mobilised for a minimum period of three years, at a fixed rate of 3.5 per cent for the tenure of the deposit. The window, available till November-end, fetched around $28 billion of inflows.
“There was more stability in the rupee in October, compared to September due to which there may have been more purchases of foreign currency than sales,” said S Srinivasaraghavan, head of treasury at Dhanlaxmi Bank. According to latest data, foreign exchange reserves were at a six-month high of $291.3 billion, as on November 29.
But currency experts do not see the pace of purchases being so high in the near term. “This foreign currency is not all openly bought in the spot market. We cannot compare it with 2008, when it was strictly market intervention. A large part of it would have been the FCNR(B) money. Right now, RBI is trying to encourage OMCs to buy more dollars. Once this large demand is met, RBI may intervene,” said A Prasanna, chief economist, ICICI Securities Primary Dealership.
Extending its rising streak for the fifth straight day, the rupee appreciated by 15 paise to trade at 60.98 against the dollar in early trade today ...
Tage: Rupee | Dollar | Forex | Omcs | Rbi
Source: Business Standards
