Rupee up as state bank cuts dollar peg

Reuters: The rupee ended firmer on Monday as a state-run bank cut the currency’s peg against the dollar by 10 cents to allow the exchange rate to appreciate to 133.50, dealers said.

Dealers said after the move importer dollar demand was offset by inward remittances.

One of the two state banks, through which the Central Bank usually directs the market, sold dollars at Rs. 133.50 each in the market to keep the local currency steady, they said.

“There is no solid reason why they have dropped the rates, but certainly there is a drop in imports ahead of elections,” said a currency dealer asking not to be named.

The spot rupee closed 10 cents higher at 133.50 on Monday, after ending steady for two straight sessions at 133.60 per dollar.

Some dealers expect the currency to be less volatile until the 17 August parliamentary elections.