* Rupee recovers after hitting record low at 54.91
* RBI's Gokarn says cenbank to continue currency defense
* RBI could still target USD demand from oil
By Subhadip Sircar
MUMBAI, May 18 The Indian rupee recovered after
earlier dropping to its third consecutive daily record low,
tracking a recovery in domestic stocks and after a central bank
deputy governor said the Reserve Bank of India would continue to
defend the currency.
RBI's Subir Gokarn said the central bank will continue with
its intervention as well as administrative measures to support
the local currency, which has fallen over 10 percent since its
The rupee also recovered despite the battering of other
global risk assets on Friday as it approached the
psychologically key level of 55.00, and as traders speculated
the RBI was still liable to implement measures after already
targeting deposits and exporters' foreign currency accounts.
"I think the rupee is oversold. There cannot be an
unidirectional move. I expect the RBI to come in with some
measures which will pull back the rupee to 54-53.50 levels to
the dollar," said Subramanian Sharma, director at Greenback
The USD/INR settled at 54.42/44 per dollar on Friday
compared to Thursday's close of 54.48/49, according to State
Bank of India closing data.
The rupee had started the day on a much weaker footing,
having hit a new record low of 54.91 earlier in the session,
though gains in the main stock indexes after strong earnings
from State Bank of India helped the local unit as well.
No actual intervention from the central bank was spotted by
dealers on Friday, though traders speculated the RBI could open
a window for oil companies to buy dollars directly from the
Traders estimate demand from state-run oil firms to be about
$400-$500 million on a daily basis, forming a substantial chunk
of daily market demand.
Still, more measures from the RBI are expected after the
rupee has hit record lows in the previous three sessions,
surpassing the previous all-time lows hit in December.
Despite the central bank's best efforts, traders say the
rupee may see more falls if global risk aversion continues,
given India also faces steep challenges at home, primarily in
the form of a widening current account deficit.
The rupee has fallen 3.1 percent so far in May, despite
foreigners being net buyers of $357 million in local stocks and
bonds during the period.
The one-month offshore non-deliverable forward contracts
were at 54.78.
In the currency futures market, the most-traded
near-month dollar-rupee contracts on the National Stock
Exchange, the MCX-SX and the United Stock Exchange all ended
around 54.54 on a total volume of $4.8 billion.
(Reporting by Subhadip Sircar)