Reserve Bank said in its policy review on Friday that it is closely watching the rupee situation and will respond appropriately.
The currency recovered against the US dollar by 2% in the opening trade. It closed the day at Rs 52.7 per dollar — the biggest intra-day gain in over two years, after RBI intervened on Thursday by selling dollars."The rupee has depreciated by about 17% against the US dollar since August 5, 2011... In the face of this, several measures were taken to attract inflows," said the RBI in the mid-quarter monetary policy review.
In order to check speculation, RBI had on Thursday withdrew the facility of re-booking forex contracts for companies and foreign institutional investors (FIIs). It also reduced across-the- board exposure limits of the banks that are authorised to deal in the foreign currency.
‘‘We will manage liquidity through open market operations, should there be a constraint,” RBI governor Duvvuri Subbarao told reporters on the sidelines of an event in Mumbai.
The RBI had taken several measures in the recent past to attract inflows.
It increased limits on investment in government and corporate debt instruments by foreign investors were increased. The ceilings on interest rates payable on non-resident deposits were raised.
Experts believe that it might still take the rupee some time to recover. “It could take more than just a quarter for the rupee to return to sub-50 levels,” said Raghvendra Nath, MD, Ladderup Wealth Management.