Rbi Continues To Mop Up Greenback

The Reserve Bank of India intervened in the inter-bank foreign exchange market yesterday to prop up the dollar by mopping up a substantial $150 million. With this, the market estimates that the total volume of RBI intervention this week alone has touched $500 million.

The intervention was an attempt to support the greenback, which had depreciated sharply against the rupee in the face of good dollar inflows in the last two months.

The rupee, which looked unshakeable till May 2, has depreciated by 12 paise in just three days to touch 35.87-88, its lowest level since RBI began its aggressive post-budget intervention on March 3.

 

From 35.755-765 on May 2, the rupee slipped to 35.79-80 on Monday, and to 35.83-84 on Tuesday. It registered a further fall of 4.5 paise yesterday to close at 35.875-885.

The intervention has led to a substantial rupee inflow into the banking system. On the first two days of the current week, it is estimated to have infused Rs 1,200 crore into the market. The money would have started entering the banking system yesterday, as the date of settlement is two days after purchases are made. Assuming that RBI made its purchases at the reference rate of Rs 35.88, it could well have injected almost Rs 540 crore in the market yesterday.

Market sources say the rates in the overnight call money market have eased to 7.5 per cent, reflecting the rupee influx.

The rupee ruled at 35.74 to 35.78 for quite some time. The flush money market conditions made the Reserve Bank wary of entering the market. However, with the various outflows, it entered the market and began the aggressive mop-up, triggering an upward march of the dollar.