The Indian rupee plunged from an eight-month high after technical indicators showed that its recent advance has been unwarranted and market speculated the central bank will take measures that may slow down exports.
The currency fell 0.5 percent to 60.1825 as of 2:03 p.m. in Mumbai trade, based on Bloomberg data. On Tuesday, the currency hit 59.60, the highest level since July 30. The currency has so far gained 3.2 percent since January, sending the greenback’s relative strength index to sub-30 level, which means the dollar may rebound.
The Mint newspaper that was published today quoted the Reserve Bank of India’s Governor Raghuram Rajan as saying that a rupee trading at 55 per dollar is too strong, and may hurt exports. Exports shrank in February, halting their growth for the first time since last June.
Investors are anxiously waiting for tomorrow’s U.S. Labor Department report on jobs, which may point out to the direction the monetary stimulus will go.
“The RBI comments indicate that they don’t mind intervening in the foreign-exchange market if the rupee appreciates further,” Vikas Babu, a currency trader at Andhra Bank in Mumbai told Bloomberg. “There is some profit-booking in the rupee ahead of U.S. payrolls data, which is also weighing on the currency.”
Analysts speculate that the central bank may decide to keep the rupee within a range of 60 to 62 against the dollar, based on India’s export competitiveness and inflation.
“The currency has breached some key technical levels and strengthened quite rapidly, making it somewhat oversold situation,” said Tsutomu Soma, a Tokyo based fixed-income business unit manager at Rakuten Securities Inc. “Therefore, a brief short-term position adjustment is quite likely although a long-term trend looks to be quite bullish for the rupee.”
A Bloomberg survey estimates that U.S. labor market added 200,000 new jobs in March, up from 175,000 in February.
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