Rbi Changes Tack

Earlier, in a bid to curb excessive speculation, the RBI pumped in dollars to cool the market, and unintentionally became a part of the speculation game as every time the rupee slumped the market expected the RBI to sell dollars.

On Friday, it deferred the CRR reduction by about a month and announced fixed rate repo auctions aimed at sucking out liquidity from the money markets leading to an upward trend in short term rates.

To put further pressure on speculators, from December 15, the recent 2 per cent hike in post-shipment rupee export credit was extended to advances of all maturities upto 180 days and applicable from the date of the advance. It also reintroduced the system of monitoring cancellation of forward contracts and followed it up on Monday by disallowing the renewal of cancelled forward deals for non-trade related transactions.

The measures announced on Tuesday carried are further to the above measures. By hiking CRR by 0.5 percentage points, repos rates, putting curbs on booking forward cover and withdrawal of CRR on NRI rupee deposits the RBI is aiming to ease supply and restrict speculative demand for dollars.