The Indian rupee fell sharply on Thursday just as it looked set to test a nine-year high, knocked to a two-week low by suspected central bank intervention before a rising stock market helped it regain some poise. The partially convertible rupee ended at 40.50/51 per dollar, weaker than Wednesday's close of 40.40/41.
The rupee rose as far as 40.33, just shy of a nine-year high of 40.28 hit in May, but the sudden afternoon intervention pushed it down about 1 percent to a low of 40.75. "The market was caught short (dollars) when the central bank came in around the 40.35-40.40 levels, and that sparked some frantic position covering," said a local trader. Traders said the central bank may have bought up to $400 million to weaken the rupee.
"The Reserve Bank of India (RBI) does not comment on the day-to-day movement of the currency," a central bank spokeswoman said. The central bank had bought $2.1 billion through currency market intervention in April, the latest data shows, and bought $24 billion in the six months to end-April trying to stem the rupee's rise. Traders said the central bank has been selling rupees over the past month as it has headed back towards its May highs.