The Indian rupee eked out minor gains on Thursday, snapping three sessions of losses, but sentiment was dented after the Reserve Bank of India chief said the bank would not defend any particular exchange rate, which dealers read as likely absence of any heavy intervention.
RBI chief Duvvuri Subbarao's comments on the exchange rate, which would be read as innocuous in other circumstances, led to a sharp sell-off in the rupee, which the market took as a signal that any significant intervention was unlikely despite the currency hovering near record lows. The absence of any strong comments from the governor to support the rupee was also a dampener for the markets, dealers said.
"The RBI governor's comments on not protecting any particular rupee levels and concerns on the deficit did not go down well with the currency market," said Uday Bhatt, a senior manager at UCO Bank. The rupee was supported by a strong stock performance with local stocks gaining 1.2 percent. The partially convertible rupee closed at 60.13/14, compared with its previous close of 60.215/225. It fell to as much as 60.38 after the governor's comments. In the offshore non-deliverable forwards, the one-month contract was at 60.51, while the three-month was at 61.21. In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 60.46 with a total traded volume of $4.9 billion.