Indian rupee holds below 80 a dollar mark, RBI hand suspected

MUMBAI: The Indian rupee was held below the 80-per-dollar mark on Wednesday aided by the central bank’s dollar-selling intervention, traders said, while gains in the domestic share market and a fall in global crude oil prices also helped.

The euro held near two-week highs versus the dollar on expectations of a bigger ECB interest rate increase this week than earlier anticipated and a Reuters report that a key Russian gas pipeline would reopen on time after maintenance.

India’s partially convertible rupee ended trading at 79.99 per dollar, weaker compared to its close of 79.94 on Tuesday, when it had hit a record low of 80.0650.

“We expect the pair to trade in the range of 79.80-80.10 this week,” economists at HDFC Bank said in a research note.

The Reserve Bank of India has been aggressively intervening in the market to prevent runaway depreciation in the currency in recent weeks.

A senior source aware of the RBI’s thinking said the central bank is prepared to sell a sixth of its foreign exchange reserves to defend the rupee.

Traders said stronger domestic shares helped sentiment, but a reversal of foreign fund buying will be key for the rupee. Foreign investors have sold nearly $30 billion worth of shares since the start of this year.

Tech, energy stocks propel Indian shares to over six-week high

Indian shares rose more than 1% to a six-week high as oil producers and refiners surged after the government slashed windfall taxes on local crude sales and fuel exports.

“Until we start seeing inflows into the market, rupee will remain under pressure. Inflows are unlikely to start in a rush,” a senior trader at a foreign bank said.

He said movement in global crude oil prices will remain important for bonds and rupee in the interim, as India imports more than two-thirds of its oil needs and higher crude expands the country’s trade and account account deficit.

Oil prices fell more than $1 a barrel under pressure from global central bank efforts to limit inflation and ahead of expected builds in U.S. crude inventories as fuel demand weakens.

In the domestic debt market, the benchmark 10-year bond yield ended up 2 basis points at 7.45%.