Rupee up on RBI Action, RIL’s Dollar Sale

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Rupee up 89Paise on RBI Action, RIL’s Dollar Sale

After weakening about 80 paise in early trades, the Indian rupee staged a recovery against the dollar on 30th August, 2013 Friday to close at 65.71, up 89 paise from Thursday’s close of 66.60. The rupee was supported by Reliance Industries’ sale of $400 million through banks that turned the tide, leading to a smart recovery in afternoon trade.

“RIL started selling dollars in the morning when the rupee was at 67.2 and by the end of sale, the rupee had already appreciated by 50 paise to 66.7,” said a dealer operating in forex market of a PSU bank.

RIL’s sale was followed by Reserve Bank of India’s intervention in the foreign exchange market, which helped the local currency to close below the 66 level. “Month – end dollar demand from importers kept the Indian rupee under pressure but a massive dollar sale by RBI and some corporate relieved the situation for the falling rupee,” said the dealer. Syndicate Bank was RIL’s lead banker for the transaction.

On Thursday, the rupee had recorded its biggest ever recovery since the Indian currency was made partially convertible as RBI opened its foreign exchange swap window to lend dollars to meet daily requirements of three public sector oil marketing companies ( OMCs ).

An email sent to RIL remained unanswered. Investment adviser S P Tulsian feels it’s technically a positive move for the market. “RIL has huge export realizations so I won’t be surprised if they sell dollars. However, I don’t think they have a big presence in the currency market or this dollar sale was part of their treasury operations.”

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RIL has been one of the biggest beneficiaries of the weakening rupee in this quarter as it exports two-thirds of its refined products. A sliding rupee along with strong other income is likely to boost RIL’s profitability in the ongoing quarter ending September.

RIL shares on the BSE gained 0.7% to close at Rs 852 in a firm Mumbai market on Friday. Tracking the rebound in the rupee, the blue-chip shares surged, pushing the sensex up by 1% on a volatile trade on Friday. The sensex rose nearly 219 points to over two-week high of 18,620 after Prime Minister Manmohan Singh promised not to resort to capital controls or reverse economic reforms to tackle turbulence in markets.

The markets were encouraged by the PM’s detailed statement in Parliament where he appealed for a political consensus to put the economy back on a high – growth trajectory. Singh also said the government would make every effort to maintain a macroeconomic framework friendly to foreign capital inflows to enable orderly financing of the current account deficit.

Receding fears of an attack on Syria after British lawmakers voted against military action, which had kept global oil prices under pressure, also aided domestic sentiment.

After plunging to a record low of 68.83 on 28th August, 2013 the rupee has rebounded 312 paise, providing the much – needed relief amid concerns about the economy, which grew at 4.4% in the June quarter, the slowest pace in at least four years. The GDP data came after the markets closed on Friday.

The slowdown in growth comes even as the US economy expanded more rapidly than previously thought in the second quarter, adding to concerns that the Federal Reserve could begin tapering off its stimulus programme as early as September. Critics have recently focused on the government’s failure to revive GDP growth, assuage fears of foreign investors and cap expenditure on programmes like providing cheap foodgrains to poor people ahead of the 2014 polls.

Meanwhile, gold prices fell by ₹ 1,745/- to ₹ 31,520/- in Mumbai on sustained selling by stockists. In Delhi, the yellow metal fell by ₹ 625/- to ₹ 31,700/- per 10 grams.

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