Wednesday, August 28, 2013

Rupee jumps to 66.88 as RBI opens dollar window for oil firms - NDTV

The Indian rupee opened sharply higher against the U.S. dollar, a day after the Reserve Bank of India said it will provide dollars directly to state oil companies in its latest attempt to shore up the battered currency.

As of 09.06 a.m., the partially convertible rupee traded 2.8 per cent higher at 66.90 as against Wednesday's close of 68.80. The currency had crashed to a record low of 68.85 yesterday. It fell 3.7 per cent yesterday, its biggest one-day fall since October 1995.

Markets also opened with 1 per cent gains. The BSE Sensex jumped over 160 points, while the broader Nifty advanced nearly 55 points.

A. Prasanna, economist at ICICI Securities Primary Dealership told Reuters that RBI's announcement should immediately help the spot market and improve sentiment.

India imports nearly 80 per cent of its oil requirements and oil bill accounts for the biggest dollar outflows from the country. State-run companies such as Indian Oil Corp, Hindustan Petroleum Corp, and Bharat Petroleum Corp are the biggest source of dollar demand in markets - worth $400 million to $500 million daily - and directing them to a special window is meant to reduce pressure on the rupee.

The RBI last opened such a window during the 2008 global financial crisis, although it had been widely expected to re-implement the measures after last month telling oil companies to buy dollars from a single bank.

The steps are the latest in a series of extraordinary measures undertaken by the RBI to combat a currency fall of more than 20 per cent this year, by far the biggest decline among the Asian currencies.

The central bank's decision comes after the rupee slumped to a record low near 69 per dollar on Wednesday on growing worries that foreign investors will continue to sell out of a country facing stiff economic challenges and volatile global markets.

(With inputs from Reuters)
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