Rupee almost touches 94 to $, likely RBI intervention prevents breach

Mumbai: The rupee Wednesday bucked the robust advancing trend in Indian equities to go agonisingly close to 94 to a dollar, although mild but timely central bank interventions helped the unit stay above that psychologically important threshold, traders said.

It hovered around record lows through much of Wednesday's trading session that marked a near-4% pullback in battered equities over the past two days and closed at 93.97/$. The rupee had previously closed at 93.86/$.

The currency, traders said, came under pressure from dollar demand due to maturing non-deliverable forwards.


"Most assets appreciated, but not the rupee. Exporters are withholding their foreign currency conversions on expectations of weaker levels, and there was also month-end dollar demand at play that weighed on the currency," said Ritesh Bhansali, deputy CEO, Mecklai Financial Services.

The rupee opened at 93.95/$ and traded in a narrow range of 35 paise between 93.98/$ and 93.63/$, as markets assessed risks linked to the contradictory statements from Iran and the US on the peace process in West Asia.

Bhansali expects the rupee to strengthen a bit toward the end of the fiscal year.

"I expect 93.50/$-93.10/$ levels in the next few sessions, and maybe even stronger on the last day of this year," he said.

The Reserve Bank of India (RBI) had a mild presence, protecting the rupee from breaching the psychologically significant 94/$ mark. Central Bank presence was not felt in the offshore market before trading opened locally, dealers said.

The benchmark Brent crude contract retreated 6% to $98.1 per barrel after falling to as low as $97.15 earlier in the day. It touched an intraday high of $100.90, according to Reuters. "We are not geopolitical experts, but we would have thought Iran would have maximum leverage of high energy prices going into any negotiation. Thus, it is probably too early to expect any big drop in energy prices or a much softer dollar this week," analysts at ING said in a report.