RBI stops rupee on brink of 60/$

The rupee hit a lifetime low of 59.98 on Thursday before the Reserve Bank of India (RBI) intervened to pull it back just short of the dreaded 60 mark.

The local currency, which had opened the day weaker at 59.62 to the dollar, recovered a tad to close at 59.58 per dollar, down 86 paise, or 1.46%, from the previous close. Even that was a lifetime low.

According to market participants, the RBI intervened at least twice during the day.

“RBI was the major dollar supplier. Dollar sales from exporters were too small to meet huge dollar demand,” said a forex dealer.

Looking at the size of the daily dollar demand, the RBI may have sold over $500-700 million in order to curb the rupee fall.

On Friday, however, the local currency is expected to open below 60, making it difficult for the RBI to keep it above the psychological mark.

Typically, dollar supply is the weakest on the last day of the week, said dealers.

The dollar index, as measured against six major currencies, shot up to 82.15 from 81.43 levels seen a day ago.

But the rupee – on its way to record the seventh consecutive weekly loss, having lost 3.6% against the dollar already – wasn’t the worst. Nine other emerging market currencies had a bigger fall against the dollar, including Brazilian Real, Malaysian Ringgit and Columbian Peso.

The greenback is expected to rise further, which means more pain for the rupee.

Kuntal Sur, director at KPMG said, “The outlook of rupee will remain weak till the structural measures are taken to improve current account deficit and improve sentiment of foreign investors.”

According to Sugandha Sachdeva, AVP at Religare, the next logical support for the rupee is at 61.