The Indian rupee charged towards a fresh seven-year high on Tuesday after banks sold dollars to take advantage of firm overnight cash rates, but its path was blocked by suspected central bank intervention, traders said.
The rupee ended at 43.065/075 per dollar, not far off a seven-year high of 43.01 set on March 28, according to Reuters data. It ended at 43.45/48 per dollar on Friday, after falling 1.7 percent on Thursday on suspected central bank intervention. The rupee was not quoted on Monday, as banks stayed away from the market to make final settlements for the financial year that ended on March 31. Tuesday was the first time dealers had a chance to react to an unexpected central bank rate rise late on Friday.
"Given the pace of today's rally, it seems the market is determined to breach the 43 mark ... once that happens everyone's going to wait and see how the RBI reacts," said the chief dealer at a private bank, referring to the Reserve Bank of India. Overnight cash rates were trading at 10-11 percent on Tuesday, down from 80 percent hit on Friday, their highest level in more than a decade, but still above 6-7 percent when cash supplies are adequate.