The spot rupee nosedived to 44.15 to the dollar on aggressive FII and corporate demand. Dealers said there was no let-up in demand and the lack of dollar supplies forced the rupee lower.
The central bank is said to have intervened half-heartedly in the market in the morning, but towards late afternoon there was no signs of selling by the State Bank or any nationalised bank.
As a result, the rupee which opened the day at 44.03 slipped to Rs 44.15, before recovering marginally to 44.1450 at close.
Dealers said the demand usually comes from corporate quarters, but it is now accentuated by the FIIs' coming into the market.
This was the second day in a row when the spot rupee has tumbled more than 5 paise. And this is the second spurt of volatility in the current month after the 35 paisa dip on May 10.
The rupee had remained relatively stable in the intervening period, staying on the lower side of Rs 44 till it reached Rs 44.07 on Tuesday.
"The RBI wanted the rupee to depreciate, but not in huge dips in short spans," said a dealer with a private sector bank.
He added,"We see the rupee settling at 44.25 to 44.50 levels in the coming months so RBI shall allow the rupee to fall but not as drastically as it did in August 1998," another dealer with a private sector bank said. There was good corporate demand in the market yesterday, with foreign banks said to be the most aggressive buyers. The dollar supplies were insufficient to meet the additional demand, dealers said. Said a dealer from a foreign bank, "There was enough corporate demand but it was being capped in the past but after a point it could not be. Every one thinks the RBI will come in tomorrow to contain the rupee fall but in order to access the actual demand, they may not."
