Rupee rebounds to 66.55 as RBI opens dollar window for oil PSUs

The rupee rebounded from Wednesday's record low of 68.80 against the dollar, hitting 66.50 against the US currency, after the Reserve Bank of India opened a new window to sell dollars directly to oil sector PSUs.

The rupee opened trading on the interbank foreign exchange market at 66.90 to a dollar against the previous close of 68.80 and later fell to a low of 67.92 on dollar demand from importers. It bounced back to 66.51 before ending at 66.55, posting a gain of 225 paise or 3.27 per cent.

The 225 paise rise against the dollar on Thursday is the rupee's biggest one-day gain in at least 15 years.

Fresh dollar sales by exporters on expectations of a further rise in the rupee helped the rupee end a three-day losing streak even as the dollar strengthened overseas and capital outflows continued.

RBI's move to provide dollars directly to oil companies offered relief to the currency market. Market sentiment in other emerging economies also helped the rupee climb back.

Oil PSUs on an average buy foreign exchange worth $400 million to $500 million daily from the spot market to meet their import needs and RBI's decision to ease this burden on forex dealers has come as a big relief to the currency market.

The RBI will henceforth sell dollar through designated entities to Indian Oil Corp Ltd (IOC), Hindustan Petroleum Corp (HPCL), and Bharat Petroleum Corp Ltd (BPCL). RBI said the facility will continue till further orders.

Analysts, however, say the rupee's gain on RBI's decision could only be short-lived and will not have any long term impact on rupee value.

For this, however, the government would have to convince markets of its willingness to tackle India's fiscal and current account deficits and slowing growth.