Dollar crunch pulls rupee down to 44.01
MARKETS REPORT
| Outlook: The rupee is expected to open between 43.96 and 43.98 against the dollar on Friday. |
| Frantic dollar buying by banks, triggered off by an acute dollar shortage in the foreign exchange market, pulled the rupee down to a low of 44.01 against the dollar during the day. |
| Forward dollars across maturities were sold at a discount, while cash dollars (which will be sold back tomorrow) were available at a premium of 7 per cent. |
| According to dealers, demand from banks to cover short positions, coupled with the Reserve Bank of India's intervention and a huge demand for import payment from a single corporate led to the rupee losing 20 paise in one trading session. |
| It opened today at 43.80/81 and closed at 43.9750/9850 on the back of dollar sales by exporters after touching a low of 44.01. With today's movement, the rupee has lost 71 paise since it reached a high of 43.30 on April 1. |
| Demand for cash dollars led banks into swaps in the cash-spot market and subsequently, with each depreciation of the rupee, exporters booked receivables. Both these forced forwards into discounts across maturities. |
| While cash ( today) dollars could be bought for being sold in the spot ( day after tomorrow) market at a premium of three per cent, the pressure is high if these were sold tomorrow. Thus cash was trading at a discount of 7 per cent. |
| For other maturities, dollars were even cheaper, with the one month, six month and one year trading at -2.5 per cent, -0.6 per cent and -0.3 per cent, respectively. Dealers said the RBI intervened in the spot market but stayed away from the forward market. |
| With the spot rupee coming under renewed pressure from a single huge import payment, most of the banks got caught with uncovered short positions. This cumulative demand pushed down the rupee. |
| Money market |
| Sentiment: Bullish |
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