Re Sheds 30 P To Hit 42.96

The rupee fell to 42.96 per dollar yesterday on frenzied buying of the greenback as fears of another Asian crisis contagion gripped the local forex markets.

Market players say the rupee may test the 43 mark today unless the Reserve Bank steps in the steady the Indian currency.

The rupee yesterday closed at 42.91 against 42.67 on Monday, a 24 paise drop and barely above June 23, 1998 historic low of 42.97-43.03. Dealers reported late evening deals up to 42.96.

The forward rupee also weakened and dollar premiums firmed by eight to 25 paise across maturities. In percentage terms, premiums closed at 5.86 percent for one month (against 4.47 on Monday), 8.32 percent for six months (7.75), and 9.20 for 12 months (8.65).

 

Dealers expect the rupee to test the 43 mark today if the Reserve Bank of India (RBI) did not intervene and added that signs pointed to further turbulence for the Indian currency markets.

Spot rupee opened at 42.68-72 amid uneasy sentiment and gradually weakened to 42.72-74 on dollar demand even as market players watched the Asian markets, dealers said.

The Japanese yen's drop beyond 147 per dollar at noon crippled international markets bringing down local markets also and a fresh wave of demand took the rupee down further to 42.77, they added.

Even as it settled at 42.80 late noon, inter-bank covering in the last hour of trade, took it down further to the close. Dealers said volumes were slightly above normal with demand outstripping supplies.

They said the central bank made routine enquiries which left the market unimpacted. The State Bank of India (SBI) which capped the rupee-dollar parity at 42.70 on Monday, did not appear to be supporting the rupee yesterday, as it bought dollars along with other banks, dealers said.

"The central bank's stand is somewhat surprising," one foreign bank dealer said. He said the pressures were building on the rupee since late last week as tension mounted in the Asian markets sending leading currencies and stock indices tumbling.

The rupee, which held around 42.50 for several weeks, finally succumbed last Friday.

"If the central bank does not support the rupee on Wednesday, it will clock a fresh low," he said.

Yesterday, prices of government securities which were on a bull run in the morning, turned around in reaction to the weakening rupee. There was selling pressure as a few foreign banks and primary dealers were seen offloading stocks, a result of which the morning gains were wiped out.

Among actively traded securities, the 11.55 per cent 2001 which was traded at Rs 100.40-41 in the morning fell to Rs 100.28 levels. The 11.64 per cent 2000 which was traded at Rs 101.40 earlier also came down to around Rs 101.28 levels.