Mumbai: The rupee hit a record low of 50.60 per dollar on Thursday morning and traders said its fall was stopped by aggressive dollar sales by some state-run banks that looked to be intervention on behalf of the Reserve Bank of India (RBI).

At 11 a.m., the partially convertible rupee was at 50.49/50 per dollar, 0.9 percent weaker than Wednesday's close of 50.02/03.

It touched a record low of 50.60 in early trade. The previous low of 50.29 was set in late October.

"The Reserve Bank of India came in around 50.50 at sold a bit to 50.35," said Agam Gupta, head of forex trading at Standard Chartered Bank. "Importers are buying dollars in the market".

Three other dealers confirmed state-run banks were seen selling dollars to help the rupee find a floor.

The RBI buys or sells dollars via state-run banks to prevent excessive volatility in the forex market and avoid any sharp appreciation or depreciation in the currency.

Dealers said they were also eyeing the stock market to gauge cues on foreign fund flows. Indian shares opened 4.25 percent lower as the market was caught up in a global sell-off after U.S. markets plunged to 5-½ year lows.

Foreign institutional investors have already pulled out more than $13 billion from Indian stocks, after buying a record $17.4 billion last year.

Some banks were also buying dollars to arbitrage against non-deliverable forwards in offshore markets, traders said.

One-month non-deliverable forward contracts were quoting at 51.89/52.04 per dollar, 2.7 percent weaker than the onshore spot rate, indicating a bearish outlook in the near term.

 

Source : Reuters