The Indian rupee extended its losses into a second session on Monday to end at a 2-week closing low against the dollar after dealers said the central bank had again intervened in the market.
The partially convertible rupee finished at 44.9825/99 against the dollar, down 0.6 percent on the day and 1.4 percent off an eight-month high of 44.35 hit on Friday. It was the weakest close since October 31, when it ended at 45.01/02.
"There was sustained central bank intervention which drove the rupee down to 45 against the dollar," said the chief trader at an private sector Indian bank. "The intervention saw importers rushing to cover their positions."
The Reserve Bank of India (RBI) was suspected of intervening on Friday when the rupee fell sharply from its high. Central bank chief Yaga Venugopal Reddy said on Friday the RBI monitored exchange rate volatility and intervened when necessary.
The RBI does not have an explicit target or range for the rupee, but says it intervenes to smooth volatility and prevent the currency from straying too far from what it considers fair value.
According to a J.P. Morgan index, the rupee is overvalued by 8.4 percent - down from nearly 9 percent last week. A chief dealer at a large local company said the rupee's fall could draw more overseas investors to local stock markets, which ended at another record high on Monday.
The benchmark BSE index ended up 0.87 percent at 13,399.00 points, a record close, and just off a new peak of 13,410.08 set during the day. Foreign buying of local equities has topped a net $7 billion so far in 2006.
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