"The rupee closed at Rs. 131.80/132.00 after opening the day at Rs. 130.35/45 on importer demand. These imports are for essential items and we are not seeing any inflows that can offset this demand," a currency dealer said.
Another dealer said that overnight limits set by the Central Bank meant that banks had to purchase their customers’ dollar requirements from the market, which creates this volatility.
"If we see some inflows then we would see the rupee strengthen again. But for the exchange rate to move to Rs. 125 we would need a substantial inflow. At the moment, market players seem to be happy at keeping the rate at around Rs. 130," another dealer said.
Dealers are uncertain about the short term direction of the rupee despite the Central Bank and Treasury predicting it would settle at Rs. 125 to a dollar.
Treasury Secretary Dr. P. B. Jayasundera said the government was ready to intervene if speculators continued to weaken the rupee.
"With the IMF in town, it is unlikely that we would see any intervention this week. We expect import demand to pressure the exchange rate this week. But small inflows could check this trend," a currency dealer said.