The Indian rupee was trading higher by 52 paise to 72.18 against the dollar at around 4.30 pm on Wednesday from Tuesday's close of 72.70/dollar. It hit a fresh low of 72.92/dollar earlier today. The recovery was made mainly after a Bloomberg report said that Prime Minister Narendra Modi may hold an economic review this weekend to come up with a recovery plan for the currency and oil, according to an undisclosed source. After the news broke, the rupee was seen trading at 71.92/dollar, stronger by 1.1 percent from the low of 72.91/dollar.
The stock markets were also seen recovering where the BSE index Sensex climbed 0.81 percent or 305 points to 37,718 while NSE's Nifty 50 rose 0.73 percent or 82 points to 11,370. The 10-year bond yields dropped by 5 basis points to 8.13 percent.
Later the Economic Affairs Secretary, Subhash Garg in a tweet said that there was no fundamental rationale for the rupee to depreciate to the levels seen on Tuesday. In retrospect, the rupee scaled to a new low of 72.74/dollar on Tuesday before settling at 72.69/dollar at closing.
He further said, "Government and RBI will do everything to ensure that rupee does not slide to unreasonable levels. Today's correction seems to reflect that realisation." This goes to indicate a possible intervention from the RBI (Reserve Bank of India) that helped the rupee gain.
No fundamental rationale for rupee to depreciate to levels we saw till yesterday. It reflected overreaction of market operators. Government and RBI will do everything to ensure that rupee does not slide to unreasonable levels. Today’s correction seems to reflect that realisation.— Subhash Chandra Garg (@SecretaryDEA) September 12, 2018