The Hindu : Business : Rupee tumbles to 11-month low

Online edition of India's National Newspaper
Wednesday, Jun 23, 2004

Business

Business

Rupee tumbles to 11-month low

MUMBAI, JUNE 22. The rupee lost another 32 paise against the U.S. currency today, as sustained hectic all round dollar demand amidst dwindling supplies drove it down to a 11-month closing low of 46.24/26 a dollar with sentiment bearish for further declines.

In volatile trading at the interbank foreign exchange market, nervous operators scrambled to cover short-dollar positions from the onset of business in the face of receding dollar supplies from trade and foreign fund inflows.

Opening around 45.95/98, the rupee breached the crucial 46 a dollar barrier and plunged to 46.11/13 in late morning deals. In the absence of central bank intervention in support of the rupee, a new wave of hectic dollar short covering sent the domestic currency tumbling down to 11-month closing low 46.24/26, dealers said.

The rupee crashed by 27 paise yesterday and with today's 32 paise decline, it has depreciated by over 127 paise or over 2-1/4 per cent since June 9, dragged down by persistent heavy dollar demand amidst dwindling supplies. It had last ended at 46.26/27 on July 18 last year. Heavy dollar demand from large oil companies, coupled with hectic short covering by corporates and importers continued to exert tremendous pressure on the rupee, a dealer said. In addition, inflows from foreign institutional investors had virtually dried-up ahead of the budget next month, he added. Foreign exchange dealers said exporters, expecting more weakening of the rupee, were reluctant to part with their remittances, which put further pressure on the rupee.

Meanwhile, the Reserve Bank of India fixed the reference rate for the U.S. currency at Rs. 46.20 and for the single European unit at Rs. 55.85. Traders expect the nervousness in the forex market to remain till the budget.

Premiums on the forward dollar spurted across all maturities due to persistent hectic paying pressure after importers and corporates rushed to cover their open exposures.

Cancellation of forward export contracts also aided the steep rise in forward premiums, dealers said.

— PTI

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