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The rupee tested an intraday low of 56.13 to the dollar on Tuesday as there was a spillover of the previous day’s negative sentiment.
The negative sentiment was the result of Fitch Ratings revising India’s credit outlook to negative from stable and the Reserve Bank of India holding the interest rates steady.
Opening at 55.90, which was also the intraday high, the rupee depreciated to 56.13 in afternoon trades and closed at 55.96 per dollar (previous close 55.93).
The rupee clawed back from the lows on the back of dollar inflows from foreign institutional investors (investing in stock markets). Dealers say the Reserve Bank of India may have sold dollars to prop up the rupee.
The domestic unit is expected to trade in the 55.80-56.20 range tomorrow.
Meanwhile, the RBI Governor, Dr D. Subbarao, said the rupee movement is due to global and domestic factors as well as current and capital account factors.
At an IMC meeting the Governor said “the RBI’s exchange rate policy is to intervene to smooth volatility and steep movement.”
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