The Indian rupee closed stronger on Wednesday, partially recovering from its slump in the previous session, aided by dollar sales from foreign banks and likely intervention from the Reserve Bank of India.
The rupee closed at 83.37 against the U.S. dollar, up nearly 0.2% compared with its close of 83.53 in the previous session.
The rupee had logged its worst single-day percentage fall in more than a year on Tuesday following a narrower-than-expected victory margin for Indian Prime Minister Narendra Modi’s alliance in the country’s elections.
The Reserve Bank of India likely intervened in the non-deliverable forwards market to support the rupee, traders said.
Dollar sales from foreign banks helped the rupee climb above 83.40 in the latter half of the session, a foreign exchange trader at a foreign bank said.
Benchmark Indian equity indices, the BSE Sensex and Nifty 50 also gained on Wednesday, ending the session higher by about 3% each after logging their worst single-day fall in four years in the previous session.
The rupee is likely to “oscillate between 83.30 and 83.60 in the near-term,” said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
The dollar index rose 0.2% to 104.3 while most Asian currencies slipped, with the Indonesian rupiah down 0.4% and leading losses.
Traders expect the rupee to face some pressure as markets digest the election outcome but the RBI is widely expected to keep sharp deprecation at bay.
Modi is expected to be sworn-in for a record-equalling third term on June 8.
Investors will also keep an eye on the RBI’s monetary policy decision and the closely watched U.S. non-farm payrolls report, both due on Friday.
