Sbi Absence Pulls Down Rupee 5 Paise

The spot rupee fell by over 5 paise yesterday to 44.56, continuing with the trend of a slow but definite depreciation.

The market opened slightly higher than the previous day, and within minutes of opening, fell to the day's low of 44.58. Dealers attributed the initial reaction to the near absence of the State Bank of India at the 44.51 levels.

"This caused the rupee to drop almost immediately to the day's low," said a dealer with a foreign bank. But the State Bank resurfaced on the sell side at around 44.56/58 levels which restricted any further movements in the rupee.

Dealers said the rupee was slipping despite the Reserve Bank of India's measures as "the demand is genuine and is distributed over many sectors. It was not restricted to the oil sector or defence." There were also very little inflows yesterday since Monday was a holiday in the US."

They said a good amount of business was done through out the day. "There is no single reason for the increased demand. It is coming from all

quarters_large and small corporates," a dealer said. He also said the the problem was caused on the supply side.

"Compared to foreign institutional investment inflows in March and April, this month's inflows are a trickle," a dealer with a private bank said. "Also, with the equity markets rangebound, traders see no recovery in the FII inflows, creating the sentiment of continuing shortage in supplies," he added.

Some nationalised banks were said to be buying aggressively and the SBI was the only bank selling.

"The market sentiment is bad. It has not recovered from the fall the rupee had last week. Unless the intervention continues, the rupee could seek previously unforeseen levels," said a dealer with a foreign bank.