The Indian rupee ended weaker on Thursday on last-minute dollar demand from oil refiners, who bought the US unit to fund fresh crude imports. However, it recovered much of the day's losses after banks sold dollars as they braced for higher statutory reserve requirements.
The rupee ended at 42.84/85 per dollar, down from the previous close of 42.8275/8375, but off the day's low of 42.95. It had hit a eight-year peak of 42.76 on Monday. Traders, however, expect the rupee's weakness to be temporary, as banks are seen selling dollars in the coming days to generate funds to meet a higher cash reserve ratio (CRR) from this weekend.
Last month, the Reserve Bank of India (RBI) raised the CRR - the percentage of deposits banks need to keep with the central bank - by 50 basis points in two stages to 6.50 percent. The first stage of this increase takes effect on Saturday. "Fears of RBI intervention is expected to check the rupee's gains," a foreign bank trader said.
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