The Indian rupee, or INR, opened on a strong note against the U.S. dollar on Wednesday after the finance ministry and the country’s central bank stepped in to prevent a further fall in the currency, which hit record lows over the past two days of trading.
The INR strengthened 0.25 percent to 58.206 in mid-morning trade. On Tuesday, the rupee had touched an all-time low of 58.98 against the dollar, but later recovered to close at 58.39, after an intervention by the Reserve Bank of India, or RBI.
"Finally the central bank stepped in. The selling was not huge, but enough to cause a rebound in the rupee," Reuters reported, citing a senior dealer with a state-run bank, who declined to be identified given the sensitivity of the matter.
The finance ministry also helped the rupee's case by announcing a number of measures, to be initiated in the next few days, to increase foreign investment flow and narrow the country's gaping current account deficit.
"In the coming weeks, we will recommend to the Cabinet policies to enhance FDI limits on number of areas all this will help not just in short-term objective of financing the CAD safely but also in the longer term objective of ensuring sustainable growth," Raghuram Rajan, India's chief economic adviser and former chief economist at the International Monetary Fund, told reporters on Tuesday, according to media reports.
The rupee has lost more than 3 percent this week and has depreciated by nearly 8 percent against the greenback since the first week of May, as stable growth prospects in the U.S. and speculation that the Federal Reserve might phase out its bond-buying program has pushed the dollar index up against emerging-market currencies.
The rupee's recent plunge has also diminished the chances of an interest rate cut by the RBI at its policy meeting on June 17.
Despite the rupee's show of strength early on Wednesday, it is expected to remain volatile ahead of a release of monthly data on inflation and industrial production in the afternoon.
The BSE Sensex, India's benchmark stock index, was down 0.33 percent in early trade on Wednesday.