Despite a heavy battering, the rupee made a smart recovery to close at 63.25 after hitting a fresh low of 64.13 against the US dollar, helped by massive intervention by RBI.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced sharply weak at 63.75 a dollar from overnight close of 63.13. It sank below 64-mark to historic low of 64.13 on sluggish local stocks and continued dollar demand from importers.
However, the rupee later recovered smartly on dollar selling by RBI and exporters. It touched the day's high of 63.15, before settling at a closing low of 63.25, a fall of 12 paise over Monday’s close.
“The RBI was seen selling dollars via state-run banks around the 64.00 levels which helped rupee to trade stable and recover slightly," said Pramit Brahmbhatt, CEO, Alpari Financial Services (India). Forex dealers said the intra-day movement from the rupee against the dollar from 61.65 to 64.13 was swift.
"The US dollar was also seen weakening internationally before the FOMC minutes which is due for Wednesday. We will be looking at the July minutes for potential details on the process for tapering as well as the level of conviction within the central bank," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
Experts forecast spot Rupee to fall down further as dollar demand from defence & oil importers will force the local currency to trade near the 64.50 level in coming days.
With the rupee breaching the 64 to a dollar mark intra-day, finance minister P Chidambaram held a meeting with top government functionaries, including the Prime Minister’s key economic advisor C Rangarajan.
Chidambaram, who met top officials for the second day in succession on Tuesday, may have also discussed the reform measures the government plans to take in the near future and steps that will bring back the economy to high growth path.
To restrict the outflow of foreign currency, RBI had on August 14 announced stern measures, including curbs on Indian firms investing abroad and on outward remittances by resident Indians.