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Our Bureau

Mumbai, July 25

The rupee closed higher against the US dollar on Tuesday after the Reserve Bank of India increased short-term rates by 25 basis points in the quarterly review of the monetary policy. However, underlying sentiment was weak because oil prices were still high, said dealers. The rupee opened at 46.90 and touched 46.78 immediately after the announcement of the rate hike. It then dipped to 46.84 before finally ending at 46.82, 10 paise higher than Monday's close of 46.91/92. "The rupee has been on a roller coaster ride in the range of 46.80-46.90," said the chief of treasury of a private sector bank. The rupee also got some support from other currencies such as the euro and pound, which advanced against the dollar. But as oil prices rose again after a slight dip in the last two days, the pressure on the rupee is likely to continue.

Month-end dollar demand could weaken the rupee further, the official said. The dollar was weak because China issued a statement saying it may diversify its reserves as it expects the dollar to weaken. This created a temporary support for the euro and pound. The forwards did not see much movement, with the six-month closing at 0.97 per cent (1 per cent) and the one-year closing at 1.11 per cent (1.13 per cent).

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