Dollar Dearth Drives Rupee Down

FOREX REPORT

The spot rupee declined to close at 44.0250 yesterday, after touching an intra-day low of 44.04 due to a sparseness in dollar supplies. Forward premiums, tracking the rupee, also dipped by four-six paise, to close higher than the previous day's close.

"There was a lot more demand in the market yesterday, and the Reserve Bank of India (RBI) and the State Bank of India (SBI) allowed the rupee to depreciate to its closing levels," said a dealer with a private sector bank.

Most dealers believe that the controls exerted by the apex bank through disguised intervention could not have gone on indeterminately and that once the supplies fell short, the rupee would escalate. The rupee opened at 43.97, touched a low of 44.04, and closed at 44.02. "During the course of trading, SBI and other nationalised banks tried to pull the rupee up back to the 97-levels, but were unable to do so," said a dealer with a foreign bank. "The underlying demand, which was not allowed to surface, finally has surfaced," he added.

 

A dealer with a nationalised bank said, "The rupee depreciated only because the supplies were less and they were not matching the demand in the market." The spot rupee is expected to remain in the 44-44.10 range today, to eventually settle this month at the 44.15-44.18 levels. "What level the rupee will settle at is entirely dependent on the SBI and RBI," said a dealer with a foreign bank.

The forward premiums moved up a bit, tracking the movement of the spot rupee, to close four-six paise higher than the previous day's close. "There was a lot of corporate interest paying and once the rupee broke, the forwards also moved," said a dealer with a private sector bank.

The far forwards inched up by around five paise, to close higher than the previous day's levels. "There was good pressure and we have seen paying in the last few days," he added.