Rbi Steps In As Re Touches 35.80 Against $

In a sharp about-turn to the pre-budget bearish sentiment on the rupee, the first day of post-budget foreign exchange trading saw the Indian currency perk up by 10 paise against the dollar yesterday.

A market-friendly budget and consequent expectations of strong dollar inflows in the coming months saw the rupee move up to 35.80 against the dollar in the inter-bank forex market, forcing the Reserve Bank of India (RBI) to enter the market to support the dollar at 35.81 to 35.82.

Signs of panic were observed among exporters who sold in the spot market as well as the forward market, causing the six-month annualised forward premium to slip to 6.5 per cent at the close of the days trading from 7.4 per cent on Friday. Importers, on the other hand, were seen cancelling forward contracts.

 

Meanwhile, exporters are expressing concern over the RBIs intervention policy. With substantial dollar inflows expected, Euro equity issues and external commercial borrowings, the long-standing spectre of a weakening rupee seems to have receded despite the oil bill. Exporters hence want stronger intervention by the RBI.