MUMBAI, January 15: The rupee continued its downward slide against the dollar and touched a new low of 40.35 before the Reserve Bank of India along with the State Bank of India stepped in to pump in around $ 100 million to arrest the fall of the Indian currency. The rupee opened at 40.15/18 - at the same closing level of Wednesday's - but weakened as corporate demand for dollars went up. The Indian unit weakened to 40.30/35 - an all-time low - before the Reserve Bank stepped in followed by the State Bank to sell dollars. This saw the rupee recovering to trade at 40.20.``Most of the deals during the day were conducted at 40.20/30 levels. For a brief while the rupee did trade at 40.18 but subsequent dollar demand from corporates saw the rupee weaken to close at 40.22/27,'' a dealer in a private bank said.
Dealers said that in the kerb most deals were struck at 40.30. ``The rupee will weaken and open at 40.35 levels as corporates are still buying,'' a dealer in a public sector bank said. The forward premium
on dollar continued to go up with one-month forwards (annualised) touching a record high of 30 per cent while six months firmed up by 100 basis points to 13.80 per cent.
The forward premium continued to firm as RBI conducted some swap deals.
``These are token deals which can't cool the market. It has to take a measure to rein in the forwards otherwise a clear signal is being sent that the RBI wants the interest rates to firm up,'' a chief dealer in a foreign bank said.
Banks have been clamouring for a rollover of measures by the RBI. ``RBI should restore the nostro account outside the purview of the 15 per cent overseas investment ceiling. It should also lift the overnight limits,'' said the treasury chief in a European bank.
The Reserve Bank of India, meanwhile, refused to make any statement on the rupee issue. ``Corporate demand for dollars is coming through and this is mainly coming from the large firms,'' another dealer said. It was felt that the Reserve Bank should do something to calm the
markets. Many felt that unless the central bank did a strong intervention or spell out where they would like the rupee to be at, it is tough to change market sentiment.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
