Indian rupee at 81.35 per cent lower on RBI rate hike

Dealers said that the public sector had to reduce purchases in the spot market because of the easing of global markets and reports that the public sector had nudged on Friday.

The domestic currency was at 81.35 per as opposed to 81.85 at the previous close. In the last year, the has depreciated 8.6 per cent against the dollar.

Since September 21 the depreciation of the rupee has been worse since when the signaled a longer than expected US rate hike cycle. Since then, the Indian currency has lost 1.7 per cent.

The decision by the Reserve Bank of India to opt for a 50 basis-point rate hike helped the rupee, with dealers saying that the central bank's repeated commentary on the external situation suggested that it would closely watch the currency.

Higher domestic interest rates increase the appeal of local assets and widen the rate differential with the US.

Sources said on Friday that $9 billion is available at overseas branches of some Indian banks for the country's three state-owned refiners to use instead of resorting to dollar purchases in the spot market.

The credit line is only available for Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, according to a report by Reuters.

State-owned Refinery was reported to have strengthened after it was reported that it was encouraging state-owned Refinery to reduce dollar buying in the spot market and rather lean on a special credit line. This made the USDINR move towards 81.16 levels and later bounced back for a close of 81.34, said Shinhan Bank s vice-president Global Trading Centre Kunal Sodhani.

The DXY dollar index fell sharply from highs of around 114.80 to 111.60 levels, but could find some support and bounce back. He said that the broader range for USDINR continues to be 80.60 -- 82.00.