The rupee rebounded from a new all-time low to end higher on Thursday amid reports that the Reserve Bank of India (RBI) had sold some dollars to stem the slide in the local currency. Earlier, the rupee had sunk to a fresh lifetime low, as investors continued to dump the Indian currency amid worsening prospects for the local economy. The rupee ended at day's high of 53.66 per dollar after being as low as 54.3050. It opened at 54.1775 as against the previous close of 53.7150. The rupee is down ~17% against the dollar so far in 2011 and has lost more than 20% since the start of August. Last week, the Government scale down its GDP growth outlook for FY12 to 7.5%, from the initial 9%. Even this revised projection may not be attainable if there is no improvement in business confidence and consumer sentiment. India's industrial output fell 5.1% from a year earlier after a revised 2% gain in September, the Central Statistical Office (CS) said in a statement. That was the first decline since 2009. The Government and the RBI can do little to arrest the slide in the rupee, which is driven by external factors, Dr. C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said on Wednesday. "The stated policy of RBI is to prevent volatility in foreign exchange market. I think RBI will act but it is really a call of RBI and it will depend on what is happening on market," he said. He added that the behaviour of the rupee is a reflection of Current Account Deficit (CAD) and extent of capital flows. With inflation still ruling above the 9% mark, he suggested that the RBI should continue to focus on controlling rising prices. Economic growth is important but RBI has the responsibility to see that inflation comes down, Dr C. Rangarajan, said on the sidelines of the Delhi Economics Conclave. The RBI, which has raised interest rates 13 times since March 2010, is scheduled to review its monetary policy on Friday. In the last review, it had indicated that it may take a pause in rate hikes in December if inflation situation improves. The RBI has boosted its repurchase rate by 3.75% to 8.50% since the start of 2010, the most among Asia's 10 biggest economies. The RBI intervened in the foreign exchange market for the second month in a row, selling US$943mn (Rs 47.14bn) in October, according to the central bank data. The RBI had sold US$845mn in September. In both these months, the central bank did not buy any dollars. The average price at which the RBI sold dollars in September was at Rs. 48.99/dollar while the same in October was at Rs. 49.98 per dollar. The RBI had last sold dollars in November 2010. The euro rose today for the first time in four days against the dollar after Spain sold more than its maximum target at a debt auction today. The 17-nation currency pared losses versus the yen after a report showed European manufacturing and service industries contracted less than forecast. The euro rose 0.1% to $1.2999 at 6:24 a.m. in New York after weakening to $1.2946 yesterday, the lowest since Jan. 11. The European currency was flat at 101.24 yen after falling to 101.05 yen, the weakest level since Oct. 4. The yen advanced 0.2% to 77.89 per dollar. The Swiss franc strengthened against all its major counterparts after the central bank refrained from introducing new measures to weaken the currency at a policy meeting today. The franc gained the most in eight weeks against the euro after Switzerland's central bank left its limit on the currency unchanged. The Swiss National Bank kept the franc's minimum exchange rate at 1.20 per euro, in line with the forecasts of economists. The central bank also maintained its benchmark interest rate at zero. The franc gained 0.9% to 1.2269 per euro after rising as much as 1%, the biggest gain since Oct. 20. The currency was up 1% to 94.38 centimes per dollar. |
Rohit Saxena
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