Rupee Drops To 42.54 On Imf Worries

The rupee declined by five paise to 42.54-56 against the dollar and forward premiums shot up yesterday as corporates responded to the concerns of the International Monetary Fund on the Indian economy and the rupee.

Market players expect more pressure on the rupee today, especially in the spot segment.

The rupee yesterday hit an intra-day low of 42.5675 on sales by the State Bank of India, before recovering to 42.54. It had closed at 42.49-50 on Tuesday.

Dealers said there was increased corporate demand, particularly in the forward segment, following the IMF's statement that there remained a downside risk on the rupee as the Asian crisis was not yet over. The IMF has advocated that the Reserve Bank of India continue a tight money policy to support the rupee.

The six-month dollar premium closed at 8.55 per cent compared with Tuesday's close of 7.83 per cent inspite of the SBI selling forward dollars. Forward dollar premiums firmed by around 20 paise, but recovered partially on SBI receiving (buy-sell swaps).

However, finance minister Yashwant Singh's statement that the IMF's assessment of the economy was in line with internal assessments saw renewed pressure on the rupee at noon. It recovered on a fresh round of receiving by the SBI.

The spot rupee moved in tandem with the forward rupee, dipping twice to a low of 42.5675, before gaining marginally on SBI dollar sales.