The rupee posted its first gain against the US dollar on Thursday after six straight sessions of decline, recovering from a new record low earlier in the day, after Reserve Bank of India (RBI) governor D Subbarao said that the central bank may consider selling dollars directly to oil importers to arrest the slide.
The RBI board met in Mussoorie earlier in the day to chart out a strategy to stop the rupee's depreciation. The Indian currency ended the day at 55.65, appreciating by 73 paise. It touched another all-time low of 56.38 to a dollar intra-day after Subbarao's comments that the RBI is monitoring the situation and would do whatever is necessary to check the currency's fall.
Forex experts said that sentiments also favoured the rupee after the Euro regained following reports that European Union (EU) leaders had reportedly decided to honour commitments to their bailout agreement with Greece.
The recovery in the rupee from its fresh record lows also boosted sentiments in the stock market with the Sensex closing up 274 points, or 1.7% at 16,222 - the highest in a single day since March 30. Out of the 30 Sensex stocks, 24 scrips ended higher. The Nifty also ended up 86 points, or 1.8%, at 4,921.
"Since the US dollar is gaining strength against the major counterparts such as the euro, we can see the rupee weakening further," said Abhishek Goenka, chief executive officer, India Forex Advisors. "We expect a 1-3 months range of 54-57 with overall weakening bias in the rupee."
Since April end, the rupee has depreciated 6.2% against the dollar and more than 13% from its 2012 peak in February in the face of withdrawl of funds by foreign investors from India.