The rupee recovered after hitting an all-time low on Thursday as late sale of dollar by exporters and a State bank helped recoup early losses, dealers said.
The rupee fell to a fresh record low of 140.98 per dollar before recovering as a State bank, through which usually the Central Bank directs the market, sold dollars to limit the fall. Currency dealers said exporters also later sold dollars.
The spot rupee ended 0.25% firmer at 140.50/60 per dollar compared with its lowest close of 140.85/95 hit on Wednesday.
“We saw exporter convections after the State bank dollar sales prevented the currency from breaking the 141 level,” said a currency dealer asking not to be named.
Another dealer said it was not clear whether the State bank sold dollars on behalf of the Central Bank or for its own clients’ exports proceeds.
The market expects the currency to fall further in the short term if the Central Bank fails to tighten interest rates or the country does not see strong inflows soon.
The Central Bank’s floating has won a thumbs up from ratings agencies and economists after last month’s general election, but more reforms will be needed to support the currency and conserve the Central Bank’s modest reserves.
In a bid to curb dollar outflows on vehicle purchase, the Central Bank on Tuesday imposed a 70% limit on loans and advances for vehicles, a move seen aimed at easing demand for credit and stemming dollar outflows.
Finance Minister Ravi Karunanayake said last week that the rupee will be brought to an acceptable level before too long and interest rates, which have been on a rising trend, will be pushed down.
Courtesy: Daily Financial Times 18 September 2015