The Hindu Business Line : Rupee volatile, closes tad weaker

"The Reserve Bank of India's absence in the forex market may have also emboldened players to sell dollars earlier in the day," said a senior treasury official.

Importer-buying pared the early rupee gains. "Importers were buying dollars either to book profits or were short-covering to make payments," said a dealer. There was also a cash-squeeze as call rates closed at 15-16 per cent.

Traders were speculating on the possible reasons for RBI staying away.

"The tolerance level of the central bank may have increased since its intervention between December and March led to substantial infusion of liquidity as well as two hikes in the Cash Reserve Ratio. However, there may not be a change in RBI's core stance of limiting the undue appreciation of the rupee," said Mr A. Prasanna, Vice President, ICICI Securities.

Analysts said the rupee has appreciated by 3.5 per cent in April. However, dealers observe the strength of the rupee had been in tandem with the appreciation of major currencies such as the euro and the pound against the dollar. In the past two weeks, the euro had risen 150 basis points to $2.0020 and the pound gained 300 basis points to $1.3545.

Interest rate hikes in the UK and Euro zone, and the slowdown of the US economy have led to the weakening of the dollar.

The forward premia on dollar continued to remain high. The 6-month premium closed at 6.29 per cent (6.45 per cent) and the 12-month premium ended at 4.74 per cent (4.83 per cent).