The Indian rupee erased losses to end steady on Friday after the central bank sold dollars, soothing a market rattled by a steep surge in inflation.
The rupee recovered to close at 46.3600/37500 per dollar, pulling back from a low of 46.4850. It had closed Thursday at 46.3650/3800.
"The central bank intervened when the rupee fell to 46.48, which improved sentiment a bit," said a trader at a private bank.
The rupee lost ground in the morning as world prices of oil, India's largest import item, surged to fresh highs with supply concerns intensifying after a big US refinery fire and a renewed threat to beleaguered Russian major Yukos.
A sharply higher inflation rate worsened sentiment. Inflation depresses a currency by eroding its purchasing power.
The Commerce and Industry Ministry said on Friday that the inflation rate for the year to July 24 was at 7.51 percent, a percentage higher than a week earlier.
While analysts had expected the 3-1/2 month rising trend in inflation to continue, they had estimated the rise at around 20 basis points.
A finance ministry statement said inflation could be under pressure in the short-run because of firm oil prices.
The rupee has already suffered on account of a slowing in capital inflows, losing more than 6 percent from the 51-month closing high of 43.5450/5500 on April 7.
Capital inflows have slowed because of concerns about communist opposition to more liberal foreign direct investment rules and rising US interest rates amid a recovery.
Comments
Comments are closed.