Rupee stays strong aided by suspected RBI intervention

Reuters) - The rupee continued to trade stronger in the afternoon session on Wednesday, following suspected RBI intervention and dollar-selling by large corporates.

The rupee rebounded as much as 1.7 percent to 51.70 per dollar from the day’s low of 52.60, after state-run banks, who often act on behalf of the Reserve Bank of India (RBI), were spotted selling dollars.

By 3:15 p.m., the rupee had pared its rise and was trading at 52.12/13, stronger than 52.2950/3050 at close on Tuesday, when it had hit a record low of 52.73 during trade.

The RBI has always maintained that it does not protect any particular level on the rupee and would only intervene to iron out excessive volatility.

Governor Subbarao had said on Tuesday the RBI was watching the situation and would ensure the exchange rate does not impair economic stability.

The finance ministry is not in favour of any “undue” intervention by the central bank in the forex market to prop up the rupee, a senior finance ministry source told Reuters on Wednesday, a day after the local currency hit a record low against the U.S. dollar.

Investors grew more bearish on most emerging Asian currencies in the last two weeks as Europe’s debt crisis deepened, with views on the Indian rupee the most pessimistic in more than three years, a Reuters poll showed on Wednesday.