Rupee bounces back smartly to 45.60/$

The Indian rupee bounced back as the foreign institutional investors held back their the demands for the us dollars amidst improved supply of the currency from exporters and corporates in the inter-bank foreign exchange market on Wednesday.

Opening at Rs 45.75 against a dollar, the Indian currency fluctuated widely on bouts of demands and supply and hit a ceiling of Rs 45.55 in the afternoon before closing the day at Rs 45.60, posting a gain of 14 paise from the yesterday's closing level of Rs 4.74 per dollar.

Leading bankers said that the market witnessed a correction after a long period mainly due to the improvement in supply position.

Reportedly, a leading power production and distribution company has converted its foreign currency holdings which enhanced the supply of us dollars in the market. This feel-good situation might continue for couple of days more, said a leading dealer from a foreign bank.

Describing it as the first round of correction, forex dealers said that the market was very volatile as the rates were fluctuating widely. Exporters and corporates were seen bringing in their dollar holdings into the market. The reserve bank fixed its reference rate for the dollar at 45.64.

Indicating a better market sentiment for the next few days, they said that the 6-month and 12-month forward premiums fell by 40 and 25 basis points on Wednesday. However, they felt that the market might go tougher if the central bank start augmenting dollars from the market since it had, in the past, drained about $5.5 billion from the reserve in order to meet the growing import demands from the corporates and oil majors.

UNI

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