Rupee bounces back due to RBI's move to sell dollars

DOCTORED RISE: With the RBI stepping in to lift the rupee, the going gets easier

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New Delhi: The Indian rupee has been getting weaker against the US dollar; and now the Reserve Bank of India (RBI) has finally jumped in to help.

The RBI decided on Tuesday, to allow banks to borrow more by relaxing the statutory liquidity ratio or SLR.

On Wednesday, the RBI upped the liquidity adjustment facility scheme. Forex dealers say the rupee bounced back with a vengeance as foreign banks sold dollars heavily after the the RBI's steps to cool the financial markets.

The dollar fell nearly 1.3 per cent versus the rupee in early trade.

The Indian rupee rose more than 1 per cent in volatile trade on Wednesday.

The lift up was boosted by the RBI's move to keep selling dollars and lift deposit rates for non-resident Indians.

Despite the intervention, stock market losses remained a weight.

In the Indian market, shares fell nearly 1.9 per cent. Ranbaxy Laboratories fell 6.6 per cent to 379.10 rupees.

The fall came after the U.S. Food and Drug Administration said it would block more than 30 generic drugs, including some from Ranbaxy, following ongoing procedural violations in two of its plants in India.

Ranbaxy has recently agreed to be taken over by Japan's Daiichi Sankyo.

ICICI Bank , which is India's second-largest lender, tumbled as much as 10.4 per cent in the afternoon before recouping some losses before close.

The recovery came after the bank said its top management had not sold the bank's shares.

The bank said on Tuesday that it had 57 million euros ($81 million) of Lehman's senior bonds, and would increase its provision on the debt by about $28 million to cover half of that exposure.

The RBI can open more doors, but the current trend is against the rupee.

(With inputs from Reuters)