Sinking rupee gained the most in a single day in the last 15 years on Thursday as RBI’s decision to sell dollars to oil marketing companies provided relief for the domestic currency. As a result, rupee gained 225 paise and closed at 66.55 against the dollar.
Rupee rising had positive impact on stock markets also as Sensex gained 405 points and closed at 18,401.04, while Nifty added 124.05 points to close at 5,409.05 level.
The rupee, which closed at a record low at 68.80 on Wednesday, ended a three-day losing streak even as the dollar strengthened overseas and capital outflows continued. Fresh dollar sales by exporters on expectations of a further rise in the rupee also helped the local currency.
The RBI last night said PSU oil companies could buy dollars through a special swap window effective immediately. Indian Oil, Bharat Petroleum and Hindustan Petroleum are the biggest buyers of dollars, requiring about $8.5 billion every month to import an average 7.5 million tonnes of oil.
“The decision is aimed at removing a major source of dollar demand from the spot market,” said CEO of India Forex Advisors Abhishek Goenka . “The sustainability of this measure will be closely watched as the central bank had taken a similar measure in 2008, which provided short-lived relief.”
Bank of America Merrill lynch said in a report today the RBI will have to take far more pro-active steps to rebuild forex reserves, because if the status quo remains, the rupee could touch 75 per dollar by the end of 2014.
At the interbank foreign exchange market, the rupee opened at 66.90 to a dollar from the previous close of 68.80 and fell to a low of 67.92 on dollar demand from importers. It bounced back to 66.51 before ending at 66.55, a rise of 225 paise or 3.27 per cent.
The rupee’s recent decline cast a shadow in Parliament today, with opposition parties saying there was panic in the country. Prime Minister Manmohan Singh conceded the country faced a “difficult” economic situation and said he would make a statement tomorrow.
The benchmark S&P BSE Sensex flaring up by 405 points or 2.25 per cent. FIIs pulled out a net Rs1,120.43 crore of stocks yesterday, as per provisional stock exchange data. “The trading range for the rupee is expected to be within66.00 to 67.50,” said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).
Forward dollar premiums plunged on fresh receipts by exporters. The benchmark six-month forward dollar premium payable in January dropped to 214-219 paise from 246-1/2-250-1/2 paise. Far-forward contracts maturing in July tumbled to 393-398 paise from 465-470 paise.
The RBI fixed the reference rate for the dollar at 67.7060 and for the euro at 90.0295.
The rupee rebounded to 103.23 against the pound from 106.33 previously and zoomed to 67.77 per 100 yen from 70.64. It jumped to 88.26 per euro from 91.85.
Sensex rallies 405 points
Reserve Bank of India’ decision to sell dollars to oil marketing companies positively impacted markets on Thursday as Sensex surged 405 points to close at 18,401.04, while Nifty added 124.05 points to end at 5,409.05 level.
The Reserve Bank of India yesterday allowed the three state-owned oil companies to buy dollars from the central bank. The PSU oil companies are the biggest buyers of dollars, requiring $8-8.5 billion every month for the import of an average 7.5 million tonnes of crude oil. The rupee, which closed at a historic low of 68.80 yesterday, recovered and quoted at 67.30 in the afternoon.
Oil and gas led all BSE sectoral indices higher, followed by metal, FMCG, capital goods and auto shares. Sesa Goa was the biggest gainer on the index, climbing 13.54 per cent. The other major gainers were HDFC, Hindalco and Reliance Industries.
The three PSU oil companies gave up their initial gains at the close. Indian Oil rose 1.45 per cent to Rs 209.55, Bharat Petroleum climbed 0.45 per cent to Rs 270.05 and Hindustan Petroleum fell 0.31 per cent to Rs 163.55.
US President Barack Obama’s statement that he had not yet decided whether to attack Syria in the aftermath of the Assad regime allegedly using chemical weapons, also gave a reprieve to investors.