Re Touches New Low Of 40.80, Closes At 40.55

The rupee touched an all time low of 40.80 against the dollar yesterday, finally reacting to the nuclear tests and the consequent sanctions by the US government.

The rupee also closed at a new low of 40.50-55. During the past few days, the spot rupee had held rock steady but the forwards hardened. However, the rupee went into a tailspin yesterday after opening at 39.77-79. Market players fear that corporate panic will push the rupee down further. Dealers say its movement today will indicate which way its headed.

Senior RBI officials said the rupee would remain stable. There is no cause of worry about the rupee and if the last three days are any indication, the erosion is likely to be minimal, if at all it depreciates, they told PTI.

 

Yesterday, SBI initially bought on the spot and then sold at higher levels only to buy back at lower levels. The RBI was absent. The market interpreted this to mean that it wanted the rupee to depreciate. In fact, forex experts have been arguing that as per the real effective exchange rate, the rupee should be around 44 to a dollar.

Forwards were volatile too. October premiums opened at 195-205 and peaked to 210-215 before closing at 163-170. The one-month premium closed at 9.80% (8.30 on Wednesday), the three-month at 8.70% (9.15), the six-month at 9.11% (9.63), and the one-year at 8.99 % (9.50).

Call money rates opened at 8.90-9.10 % and firmed up to 9.25-9.50 % before closing lower at 8.5-8.75% . The weighted average call rate of STCI)was 8.91 per cent on a turnover of Rs 1,100 crore.

There are inflows of Rs 3,579 crore due to come into the system today, on account of the second leg of the RBI repos done on Tuesday. This could provide succor to the market.