India’s central bank has intervened to curb the slide of the rupee after it hit record lows.
Officials told AFP news agency that monetary authorities were not defending “any particular rate”. But the Reserve Bank of India (RBI) steps in when “it thinks things are being pushed a little too far”, they added.
The RBI was suspected to have intervened on Tuesday around the 58.97 mark by selling dollars.
On Wednesday the currency strengthened to 58.12 rupees against the dollar.
“The panic has subsided for the near-term. The market certainly required some type of confidence building measure,” said Abhishek Goenka, chief executive with India Forex, a consultancy firm.
But he warned that the rupee’s stronger tone was likely to be short-lived.
The finance ministry’s chief economic adviser Raghuram Rajan told reporters in New Delhi that Indian authorities “will take action as warranted” to stem the rupee’s fall.
The RBI has a policy of not commenting on movements in the foreign exchange market and of intervening only to curb volatility.
The Indian market has been hit by speculation that the US Federal Reserve will cut back on asset purchases, fuelling flows of the dollar into emerging markets as well as growing concerns about India’s economic weakness.
Emerging market currencies around the world have been hit by a stronger dollar caused by a growth in the number of US jobs.