By Nimesh Vora
MUMBAI, Jan 8 (Reuters) – The Indian rupee reversed course on Thursday after a fresh round of intervention by the Reserve Bank of India, though bankers said doubts remain over how long the move would sustain.
The rupee climbed to 89.75 from an intraday low of 89.98 after the RBI stepped in for a second straight day to push the currency higher, bankers said. It had settled at 89.88 on Wednesday.
The bankers have doubted the sustainability of the recovery in the rupee from 90.30 to the dollar, hit on Tuesday. They are advising importer clients to hedge on the rupee’s strength, citing an unconvincing outlook for a U.S.–India trade deal and slim prospects of renewed foreign inflows.
“From a risk-management perspective, the fundamentals still say that hedge ratios should be on the higher side for importers,” an FX salesperson said.
“If the news flow turns supportive (for the rupee), that’s when you revisit the coverage rather than taking on more risk than warranted right now.”
Most bankers said they were surprised by Thursday’s intervention and offered differing views on the motivation behind it.
One banker said that the RBI may be uncomfortable with the rupee trading around the 90-per-dollar handle, while another suggested the move was aimed at flushing out speculative positions. A third said the intervention was intended to restore two-way price action in the market.
Meanwhile, the rupee’s regional peers were mostly weaker on Thursday amid a cautious risk backdrop. Attention is on Friday’s closely watched U.S. non-farm payrolls report, which is expected to offer fresh clues on the labour market and the Federal Reserve’s policy path for the year ahead.
(Reporting by Nimesh Vora; Editing by Sumana Nandy and Sonia Cheema)
