The rupee gained against the dollar for the first time in six days and added 41 paise to close at 63.30 on Wednesday on fresh sales of the US currency by exporters and by state-run banks on behalf of the RBI.
Capital inflows supported the rupee after initial weakness as the dollar strengthened overseas and stocks fell.
The Reserve Bank of India, seeking to calm the currency markets, today said the current account deficit in 2013-14 will be $56 billion, lower than earlier projections, and that there is no fundamental reason for rupee depreciation.
At the interbank foreign exchange market, the rupee opened lower at 63.90 and dropped to 63.91 as stocks declined and importers bought dollars.
It bounced back on fresh dollar sales by exporters and some banks to a high of 63.28 before settling at 63.30, a rise of 41 paise or 0.64%. In the previous five sessions, the rupee had slumped 209 paise or 3.39%.
RBI Governor Raghuram Rajan said the central bank was weighing options to contain exchange rate volatility and would come out with 'appropriate' steps in the future.
"Overall, his speech came as a breather for the weakening rupee," said Abhishek Goenka, CEO of India Forex Advisors. "He also added that they will bring down the current account deficit to $56 billion this fiscal." The benchmark 30-share Sensex continued its slide and closed lower by 87.51 points or 0.43%. Overseas investors bought a net Rs. 347.58 crore of shares yesterday, according to provisional stock exchange data.
"The rupee appreciated over half a% as the Reserve Bank of India is likely to have intervened via state-run banks as rupee was falling further after it opened at a nine-week low of 63.90 against the dollar," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India). "Equity markets continued its fall...which capped the rupee's gains." The dollar index was up 0.04% against a basket of six major global currencies.