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| Re hits new closing low |
| BS Reporter / Mumbai Nov 21, 2008, 00:34 IST |
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The rupee continued to lose its strength and hit a record low of 50.5925 On Thuresday against the US dollar amid a stock market crash, which was triggered by offloading by foreign funds and weakness of international currencies against the greenback.
 It, however, recovered later on the Reserve Bank of India’s intervention to prevent a further fall.
The rupee declined 0.3 per cent to 50.155 a dollar at the close of the day’s trading according to data compiled by Bloomberg.
“The broad trend in equities is negative and there will be more capital outflows from India. As the calendar year draws to a close, overseas investors are liquidating positions in stocks to book profits or cut losses in the present market conditions,” said the head of treasury in a large public sector bank. “The demand for dollars is very strong and the supply is limited. That’s going to keep the rupee under pressure.”
Dealers said the domestic companies, which are unable to raise funds from the global market, are converting rupee borrowings into dollar to meet overseas business obligations. This is also increasing demand for the dollar in the domestic market.
Besides the factors in the domestic market, global trends are contributing to the weakness of the rupee. The dollar has turned stronger against most international currencies due to flight to safety. Thus, the rupee has turned weak in relative terms against the US currency, pointed out a State Bank of India official.
“RBI was in the market through select public sector banks to sell dollar to avoid a sharp drop and smoothen the fall,” said head of another large public sector bank.
According to IDBI Gilts data, the rupee is currently being traded at Rs 51.61/ 51.74 in the non-deliverable forward (NDF) market. The total OI On Thursday was noted at 175,761 contracts with maximum OI of 83,998 contracts seen in the USDINR 26NOV2008 futures contract.
In the forward market, dollar/rupee rate ended off lows because some banks bought forward dollars for some importers noting the pace of decline in the spot rupee. Profit booking also led to some paying, dealers said.
| MONEY MATTERS |
| Currency/dollar |
2008
|
%
Chg
|
| 2-Jan |
20-Nov |
| Korean won |
936.95 |
1497.55 |
-59.83 |
| Indonesian rupiah |
9386.00 |
12480.00 |
-32.96 |
| Pakistani rupee |
61.32 |
79.28 |
-29.28 |
| Indian rupee |
39.44 |
50.15 |
-27.17 |
| Thai baht |
29.75 |
35.14 |
-18.12 |
| Malaysian ringgit |
3.31 |
3.62 |
-9.43 |
| Singapore dollar |
1.44 |
1.53 |
-6.34 |
| Taiwan dollar |
32.45 |
33.4 |
-2.92 |
| Hong kong dollar |
7.81 |
7.75 |
0.78 |
| Japanese yen |
109.66 |
95.64 |
12.78 |
One-year forward rate had fallen to day’s low of 1.63 per cent as exporters sold forward dollars. Traders also reversed their forward dollar sales noting that RBI did not enter into buy-sell swaps, after selling the greenback in the spot market.
“After RBI sold in the spot, expectations about their selling in forwards also rose, so many received. But as they did not come paying emerged. The benchmark one- year forward premium ended at 1.77 per cent compared with 1.78 per cent Wednesday. The 6 month forward premia was at 2.45 per cent.
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