The exchange rate experienced some volatility on Tuesday (5) after the long weekend with the rupee see-sawing against the greenback before a state bank position was used to strengthen the rupee at the close, currency dealers said.
The rupee opened at around Rs. 130.50/80 against the dollar and strengthened to around Rs. 130.40/50 on inflows and export conversions.
"Import demand then pushed up the exchange rate to around Rs. 131.30 before a state bank position was used to bring it down," currency dealers said. Volumes were not very high.
The rupee closed at Rs. 130.10/40, a relatively stronger position from last Friday’s close.
Both the Central Bank and Treasury have forecast the rupee to settle at around Rs. 125 against the greenback once pressures on the balance of payments eased, although a timeframe was not given.
"The high exchange rate is hurting the people, but the government needs to stick to its policies if greater issues like the balance of payments crisis are to be resolved. Yes, the authorities acted late, and the pain of adjustment is probably severe than it could have been had necessary action been taken last year, but we need to see this through. Better late than never they say," a market analyst said.
The IMF has said that recent policy measures would put the economy on a sustainable growth trajectory. As previously reported in these pages, sovereign ratings agencies too have been positive. They were cautious however, on whether the government would be able to meet its revenue targets and its ability to see these painful policy measures through to the desired end.
"There is some talk that the president wants the exchange rate controlled. Going back to intervention would only undo attempts already made to address serious structural inefficiencies in the economy," the analyst said, not wanting to be quoted.