Rbi Measures Fail To Check Fall In Rupee

Tough talk by Reserve Bank governor Bimal Jalan on Thursday failed to impact the underlying dollar demand yesterday. The rupee fell 24 paise, or 0.5 percentage points, to close at 43.36.

The 50 per cent interest rate surcharge on import finance and a penal 25 per cent rate on overdue export bills came into effect from yesterday.

Dealers said it was obvious that there was genuine demand for the dollar and the rupee gyrations could not be dubbed speculative or simply interbank buying.

The rupee opened higher than Thursday's close of 44.10, fell to the day's low of 44.38 in the morning and allowed most transactions at these levels.

 

"It remained at 44.37/38, only to rise slightly before closing to 44.36," said a dealer with a private sector bank.

"Despite the RBI announcements, there was demand today. Most of the demand came from nationalised banks. There was also importer demand," said Alok Sharma, head of foreign exchange trading, Bank of America.

Most dealers said they had expected the rupee not to budge from its closing on Thursday after the RBI had stepped in to reduce volatility. "Despite the measures and the tough talk, the rupee lost substantial ground, indicating that there was a lot of demand still prevalent in the market," a dealer with a foreign banks said.

"There was a fear that the rupee was getting too volatile, when the RBI did not step in after the first day of the free fall. Yesterday's announcements ensured that the rupee would not be too volatile," said Subir Biswas, country treasurer, ABN Amro.

" Thursday's movements were 99 per cent speculation driven otherwise it would not have closed at 44.10, after touching 44.75. Yesterday (Friday) it was purely genuine demand and no RBI intervention is required," affirmed K N Dey, vice president, Mecklai Financial and Commercial Services Limited.