The Reserve Bank of India yesterday tried to talk the rupee down saying it will "continue to intervene directly or indirectly in the market to meet temporary demand and supply mis-matches" even as the currency closed at 45.33""a fraction lower than Wednesday's closing level of 45.3250""after hitting the intra-day low of 45.44.
In a parallel action, the RBI sucked out Rs 4,655 crore worth of liquidity from the system through a combination of one-day, four-day and seven-day repo at higher rates.
The four-day repo sucked out Rs 4,095 crore at 10 per cent while the rate for one-day repo was jacked up to 8.25 per cent from 8 per cent. The 10 per cent cut-off set for the seven-day repo is likely to trigger a hike in overnight rates which have been ruling at around 8 per cent.
The rupee recovered by a few paise before the close of the trading hours on the news that the RBI would issue a statement but the dealers said it would hardly have any impact on the market today is it did not contain any measures. The rupee is expected to remain under pressure today as there is no let up in the increasing demand for dollars.
"It can test the 45.50 level as we don't expect the RBI to sell dollars even though the statement has indicated so. It may open weaker and trade in the range of 45.20 to 45.50," said a dealer with a foreign bank.
"The statement will do absolutely nothing to cool the sentiment of the market. The market needs dollar supplies," said a dealer with a European bank.
The RBI statement was issued after the close of the trading hours. The RBI will "directly meet partially or fully, without entering the market, the foreign exchange requirements for import of crude oil by the Indian Oil Corporation and for government debt service payments," it said.
The central bank also made it clear that it will "continue to
monitor developments in the market, and take such measures as necessary from time to time in order to stabilise expectations, to the
extent feasible, and to help
reduce the effects of 'leads' and 'lags'."
Stating that the rupee has sharply appreciated or remained stable against pound sterling, euro and yen, the Reserve Bank of India statement said based on the real effective exchange rate""five country currency trade weight""the value of rupee per dollar as on August 2 was 45.34.
The RBI has reiterated his stance that it does not "target" a specific exchange rate in determining its intervention policy or timing of the measures but at the same time said, "The fact that RBI does not target a particular exchange rate does not mean that movements in the exchange
rate market, irrespective of
the pace and its level, are matter of no concern and can be ignored".
The State Bank of India chairman G G Vaidya said the fall of the rupee against the dollar is a "technical correction".
The weakening of the Indian rupee, according to him, is a temporary aberration and there was no cause for concern. "It is a temporary aberration and a technical correction which is taking place...there is no need for concern," Vaidya said.
Stating that the current level of the rupee "is fine", Vaidya said when all other currencies including euro and pound sterling are weakening against the dollar "our currency cannot move in isolation".
