Re touches 48 as banks rush for $

MONEY MARKET ROUND-UP

Rupee breached the key Rs 48-a-dollar mark and ended down against the US dollar as most banks persistently bought the greenback to meet demand from foreign institutional investors after local shares plunged over 6 per cent on Tuesday, dealers said.

The Indian unit ended at Rs 48.1200 per $1 compared with Rs 47.3800 per $1 on Monday. Intraday, the rupee moved in a wide band of Rs 47.4400-48.1500 per $1.

“There was some FII-related demand on Tuesday as local shares fell sharply,” said a dealer at a UK bank.

“Heavy demand (for dollars) began after shares fell sharply as there may have been some FII outflow,” said a dealer at a state-owned bank.

On Tuesday, the Bombay Stock Exchange’s Sensex ended down 6.61 per cent, while National Stock Exchange’s Nifty ended at 6.66 per cent from its previous close.

Dollar demand from some importers also added to fall in the Indian unit on Tuesday, dealers said.

“There was some demand from some importers who were struck by panic as rupee fell. There were also some FII outflow as local shares were down on Tuesday,” said Devesh Goyal, foreign exchange dealer, State Bank of Indore.

“Importers have been buying (dollars) heavily over the past two days,” said a dealer at another state-owned bank.

According to dealers, a large state-owned oil company was among major buyers of dollars for companies.

Some banks also bought dollars to make defence-related payments that kept the Indian unit weak on Tuesday, dealers said.

“There was good defence related purchases in the market on Tuesday, which was one of the major causes for fall in rupee,” said a dealer at a private bank.

“Some banks also covered their short dollar positions, which pulled rupee further down,” Goyal said.