Steps taken by the RBI to stem the rupee slide helped the Indian unit to bounce back sharply by 63 paise to close at one-month high of 59.13 against the Greenback, despite weak local equities, snapping two-day of losing streak.
The Reserve Bank of India RBI on Tuesday announced more measures to squeeze liquidity from the banking system to stem rupee's decline.
The rupee commenced strong at 59.49 a dollar from last close of 59.76 at the Interbank Foreign Exchange (Forex) market and immediately touched a low of 59.5950.
Later, it rebounded to a high of 59.0150 before closing at 59.13, revealing a rise of 63 paise or 1.05 pct.
Pramit Brahmbhaat, CEO, Alpari Financial Services, (India) said, "On Tuesday the RBI again took some steps to make Rupee scarce and squeeze the liquidity to support the Rupee. RBI lowered the overall limit for borrowing under the daily liquidity adjustment facility (LAF) for each bank to 0.5 percent of deposits from 1 per cent. RBI has also asked banks to maintain 99 percent of their daily cash reserve ratio requirements with the RBI compared with 70 percent now."
"The RBI also announced the sale of 60 billion Indian rupees of short end cash management bills to pull out more cash from the banking system. Taking cues from this today spot Rupee appreciated by over 1 per cent and traded near 59.00 levels. The trading range for the Spot USD/INR pair is expected to be within 58.80 to 59.40," he added.