The rupee closed stronger against the dollar for the second day running, thanks to forex market intervention and sale of currency swaps to oil marketing companies by the Reserve Bank of India (RBI). At the end of a rocky week, the local currency stood at 65.71 to the dollar, up 84 paise, or 1.3%, compared with the previous close. Recent RBI measures have helped the rupee regain about 4.5% from the record lows of 68.85 per dollar hit on Wednesday. However, this may not continue for long. “The swap window facility is only the deferment of dollar purchases by oil marketing companies by a few months, say a designated tenor of three months or so,” said Param Sarma, director & CEO, NSP Treasury Risk Management Services. “As and when the rupee normalises, the dollar demand from oil-marketing companies will hit the market on a regular basis and the dollars so purchased will be delivered to RBI via the designated bank on the due date of the swap facility,” he said. Market participants feel this exposes oil-marketing companies to the risk of rupee depreciation at the end of the swap tenor. RBI’s decision to cater to the daily demand of oil-marketing companies by way of dollar-rupee swaps came after the Indian currency fell by 256 paise in a single trading session on Wednesday. The special window is limited to state-owned Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation only. On a weekly basis, the rupee fell 3.7%, the most since September 2009. Next week, the rupee may open weaker as markets react to lower-than-expected growth in India’s gross domestic product for the first quarter of this fiscal. “The rupee may open at 67-per-dollar levels on Monday,” said a forex dealer with a public sector bank. In August, the rupee lost about 9% against the greenback, the biggest monthly depreciation since March 1992. “Indian rupee is expected to extend its decline in the near future as RBI measures alone would not lead to a sustained recovery unless the government can pass measures that can convince markets of its willingness to tackle India’s fiscal and current account deficits,” said Jayant Manglik, president - retail distribution, Religare Securities.
Posted on: Sat, 31 Aug 2013 14:51:18 +0000
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