The rupee began the day at Rs. 131.80/132.00 against the greenback and soon fell to a low of Rs. 133.50 on import demand before a transaction involving a state bank strengthened it to Rs. 132.20/40.
"The Central Bank is not intervening in the market. It has not sold a penny from its reserves for a very long time, but we believe moral suasion was used to influence the actions of a state bank which strengthened the rupee," currency dealers told The Island Financial Review.
The rupee closed at Rs. 132.60/80, still lower than the previous day’s close.
Moral suasion is where the Central Bank influences the market without using any of the tools available at its disposal.
"In moral suasion, a phone call, directive or face to face meeting usually does the trick," one dealer said.