RBI stalls rupee''s fall

RBI bailed out the rupee from a further fall yesterday. Indian Rail Finance Corporation's demand for the dollar amounting to about $70 to $80 million caused the rupee to plunge to 46.40. The RBI stepped in to prop the rupee by releasing its dollar reserves and successfully brought back the rupee into the range of 46.20 to 46.30. The RBI sees 46.30 levels as crucial and is evidently supporting the rupee from any major deviations.

The dollar high was capitalized by many banks, who were clued into the dollar demand hike by the PSU, sold off their excess dollar reserves and booked profits.

The RBI sold dollars at the 46.38 level during the last trading hour an estimated $100-150 million to stem the rupee's fall.

In the international currency trade the dollar gained strength and its value rose visa vis other currencies. The Japanese yen reached 112.16 levels owing to the surging oil prices, good US consumer data and low expectations from upcoming Japanese preliminary industrial production report for the month of June on the other hand.

The dollar rose to 1.8166 levels against the sterling pound given the lack of significant economic data forthcoming from UK. Unfortunately even though three economic releases are expected from UK tomorrow, including consumer credit, money supply and the consumer confidence report most of the reports are expected to remain unchanged.

Meanwhile in the Euro-zone, the M3 money supply growth rate unexpectedly rose in June, raising concern over inflation prospects throughout the region. The dollar being bullish rose to 1.2010 per euro and is now at 1.2020 levels.

Dollar is expected to not go much further owing to the weaker durable goods data than expected, a disappointing Fed Beige Book report. The reports indicated that the prices have been rising for producers, but these producers have found it difficult to pass these higher costs over to consumers.