India’s rupee traded near a two-week high on speculation exporters sold dollars, betting the local currency is unlikely to weaken further.
The rupee erased the day’s losses and ended at 63.7550 a dollar on Wednesday, according to prices from local banks compiled by Bloomberg. It was little changed from Tuesday’s 63.7513, the highest level seen since July 22.
The central bank is intervening in the foreign-exchange market only to curb volatility, Governor Raghuram Rajan told analysts in a post-policy conference call Tuesday.
“Exporters were seen selling dollars as the rupee approached 64,” said Navin Raghuvanshi, a currency trader at DCB Bank Ltd. in Mumbai. “The pair is facing a strong resistance near the level.”
The rupee had weakened earlier on concern U.S. interest-rate increase as early as next month will trigger outflows from emerging-market assets. It dropped as low as 63.9350 a dollar.
A gauge of dollar strength climbed to the highest level since March after Federal Reserve Bank of Atlanta President Dennis Lockhart said in an interview with the Wall Street Journal that the central bank is close to raising rates in September. The first increase in U.S. benchmark borrowing costs since 2006 will reduce the allure of higher-yielding assets in countries such as India.
Foreign reserves have reached a comfortable level and all accumulation is now a result of efforts to smooth swings in the rupee, Rajan told analysts on the conference call Tuesday. The central bank’s foreign reserves stood at $353.6 billion as of July 24, according to central bank data.
In an interview to Bloomberg Television India on Wednesday, Rajan said India’s exports are growing at a pace slower than policy makers would want. A weaker rupee boosts the value of overseas earnings in local-currency terms.
The yield on government bonds due May 2025 was little changed at 7.84 percent, according to prices from the Reserve Bank of India’s trading system.