Mumbai: The rupee washed out initial losses and snapped three-weeks of losing string, closing the week up by 46 paise against the US Dollar at 65.24 on fresh steps taken by the new RBI Governor and dollar selling by exporters.
The recovery in the rupee, the worst-performing currency in Asia this year, came as Raghuram Rajan took over as Governor of the RBI.
The Reserve Bank of India (RBI) was said to have intervened at lower levels through state-run banks, leading the bounce back in rupee.
At the Interbank Foreign Exchange (Forex) market, the local unit commenced lower at 66.15 a dollar from last weekend's close of 65.70 and moved in a wide range of 65.00 and 68.62 before settling the week at 65.24, showing a rise of 46 paise or 0.70 per cent. In last three weeks, it had plunged by 482 paise or 7.89 percent.
Initially, the rupee was under pressure after Russian media, citing the Defence Ministry, said two missile launches were detected from the central part of the Mediterranean Sea, fired towards the East. The report came amid concern about Western military action in Syria.
Goldman Sachs followed JP Morgan, HSBC and Nomura in cutting India's economic growth forecast and also said it expects the rupee to touch 72 against the dollar in the next six months.
Standard and Poor's indicated that chances of downgrading the country's credit rating were higher than for Indonesia, too weighed on the rupee at initial stages.
The RBI on Wednesday eased external commercial borrowing norms to allow companies to use overseas loans for general corporate purposes. It also clarified that the August 14 curbs were not intended to restrict bonafide overseas investments.
To support the rupee, Rajan announced steps such as enhanced limits for exporters to re-book cancelled forward exchange contracts and a special concessional window to swap foreign currency non-resident (FCNR) deposits.
Rajan announced plans to revise and strengthen the monetary policy framework and stressed the need for faster, broad-based, inclusive growth, among other steps.
The BRICS grouping, including India on Thursday decided to launch a USD 100 billion currency reserve fund to help them navigate through an imminent phase out of the US stimulus.
Separately, India and Japan on Friday expanded their currency swap arrangement to USD 50 billion from USD 15 billion.
"One important step for the rupee was taken at the G-20 summit where India and Japan have extended their existing currency swap facility," said Abhishek Goenka, CEO of India Forex Advisors. "This will enable our country to defend the exchange rate."
The RBI's liquidity-tightening measures may be rolled back by October as market sentiment and the rupee are expected to improve, Barclays said.
The fresh RBI steps are likely to raise the possibility of better forex inflows in the next three months, it added.
The forex and money markets will be closed on Monday on account of Ganesh Chaturthi.
The Indian benchmark S&P BSE Sensex rallied by 650.34 points or 3.49 percent while FIIs injected USD 150.07 million on first four days of the week as per Sebi data.
Mr. Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, "After a three week fall, Rupee closed on a higher side this week taking cues from strong local equities which also closed positively after falling for six weeks.
"This week RBIs new governor Raghuram Rajan took some actions and market reacted positively on the steps taken by the new Governor, which helped rupee to recover by almost 5 per cent from its week low."
He added, "But still high inflation, growth slowdown and FED quantitative easing fears should see fresh selling in INR, also the high CAD will not see correction any time soon either. To stabilise Rupee, we need to focus more on export revenue and inward remittances, until that happens, the central bank can intervene through borrowed funds, but we can't sustain that kind of stability. The trading range for the spot USD INR pair is expected to be within 64.50 to 67."
The premium for the forward dollar bounced back on fresh payments from banks and corporates.
The benchmark six-month forward dollar premium payable in January shot up to 248-253 paise from 221-225 paise last weekend and far-forward contracts maturing in July also spurted to 440-1/2-447-1/2 paise from 410-415 paise.
The RBI fixed the reference rate for the US dollar at 65.9600 and for the euro at 86.5828 from 66.5742 and 88.1605 last weekend, respectively.
The rupee recovered slightly against the pound sterling to 101.66 from last weekend's close of 101.86 and also recouped against the euro to 85.55 from 87.00.
It too rebounded against the Japanese yen to 65.44 per 100 yen from 66.91 last weekend.
First Published: Saturday, September 7, 2013, 16:19