After slumping to 60.90 levels in early trade, the rupee on Thursday managed to recoup most losses to end almost flat at 60.43 against the US dollar on suspected RBI intervention and stricter hedging rules for FIIs.
The dollar strengthened overseas after the US Federal Reserve gave no indication of withdrawing its bond-buying plan and US GDP growth figures were better than expected.
The rupee opened lower at 60.70 a dollar from the previous close of 60.40 at the Interbank Foreign Exchange Market. It moved in a range of 60.25 to 60.90, before PSU banks selling dollars at the behest of RBI helped the local currency end at 60.43, down 3 paise.
"Towards the end, rupee futures appreciated over 0.75 percent as RBI intervention was suspected in the foreign exchange markets to defend the rupee," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).
In yet another step to rescue the rupee, which fell to a near-record low of 61.20 yesterday, the Reserve Bank today tightened hedging rules by making it mandatory for foreign institutional investors to obtain the consent of holders of participatory notes and derivative instruments before hedging.
The benchmark S&P BSE Sensex erased initial gains and closed down about 29 points. Foreign institutional investors pumped in Rs 142.87 crore yesterday, as per provisional data with the stock exchanges.
"The trading range for the spot USD/INR pair is expected to be within 60.00 to 60.80," said Brahmbhatt.
In Chennai, RBI Governor D Subbarao reiterated there was no time frame for rolling back liquidity tightening measures imposed to address exchange rate volatility.
"The measures taken will be in place until volatility in the foreign exchange market is controlled. I do not want to give any time frame," Subbarao said.
Forward dollar premiums dropped on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in January dipped to 251-255 paise from the overnight close of 266-270 paise. Far-forward contracts maturing in July tumbled to 458-460 paise from 479-483 paise.
The RBI fixed the reference rate for the dollar at 60.7423 and for the euro at 80.6025.
The rupee fell back to 92.07 against the pound sterling from 91.84 previously and recovered to 79.99 per euro from 80.11. It also bounced back against the Japanese yen to 61.25 per 100 yen from 61.81.