Rupee gains on RBI Dollar selling, Governor's reassurance

Dollar selling by the Reserve Bank of India and sound bites from the Governor propped up the rupee, which closed at Rs. 55.65 to a dollar on Thursday, recovering 0.65 per cent from the previous close at Rs. 56.

The central bank, which intervened throughout the day, again stepped in around the same time RBI Governor D Subbarao said a separate dollar window for oil companies was being considered. "That's been an issue on the table. I am not ruling it out, I am also not saying that we will do it right now. It's an open issue, we have done it in the past. At the moment we have not done it so far," Subbarao told reporters following the RBI's board meeting at Mussorie on Thursday.

He, however, said there were no immediate plans to mobilise foreign exchange through sovereign bonds. "I cannot say in favour or out of favour. We have done it in the past and it might be done in the future. But it is not something that is being contemplated right now," Subbarao said. Conversion of export earnings and a steep petrol price hike also contributed to the rupee's gain, which rose after a 17-day losing streak. But in intra-day trades, it touched a low of Rs. 56.38 per dollar.

According to dealers, the rupee recovered as RBI sold dollars intermittently in the day and exporters brought in the dollars lying in their exchange earners' foreign currency accounts. Thursday as the deadline set by RBI for exporters to convert half of their dollar earnings reported two weeks ago when RBI issued its directive. About $2.5 billion is estimated to have come into the system through this route.

"RBI is continuously monitoring the situation. We have taken action through current account flows, encouraged inflows and also (steps) to curb speculation," said Subbarao. "(The depreciation) is a function of external situation as well as development in current account and capital account and balance of payments," he said.