RBI arrests rupee fall

The Reserve Bank of India today reined in a falling rupee by seeking the details of dollar-buying positions of commercial banks in the foreign exchange market.

The regulator's verbal intervention resulted in heavy selling by banks that had built up huge dollar positions. Consequently, the spot rupee that had slipped to 45.41 to a dollar during the day, closed at 45.15/16, almost unchanged from yesterday's closing level.

According to foreign exchange dealers, the intervention was prompted by huge arbitraging by market players between the domestic foreign exchange market and the overseas derivatives market known as the non-deliverable forward (NDF) market.

The government securities market turned bearish today due to a higher cut-off yield announced by the RBI in the 91-day and 182-day treasury bill auctions.