The Reserve Bank of India yesterday bought over $50 million in the forex market in an bid to arrest the rupees appreciation against the dollar. The rupee strengthened to Rs 35.74, notching up gains of almost 2 paise overnight. For-ward premia remained soft, with the six-month annualised premium running at 4.59 per cent.
Market sources expect the rupee to continue appreciating in the short run as the Reserve Bank limits its intervention in order to keep within its money supply target of 15.0-15.5 per cent. The central bank has set itself a target of containing inflation at around 6 per cent in 1997-98.
Noting the limited extent of the RBIs intervention in the recent past, market sources said the banks intervention was aimed at making a psychological impact on the market rather than directly preventing the rupee from appreciating.
Market sources feel that there is still scope for the Reserve Bank to intervene in the spot market to defend the competitiveness of Indian exports. When the cash reserve requirements on inter-bank liabilities are removed on April 26, a further Rs 950 crore will be infused into the system.
