The Hindu : Business : Upward correction in rupee

Online edition of India's National Newspaper
Thursday, Jun 24, 2004

Business

Business

Upward correction in rupee

MUMBAI, JUNE 23. The rupee rallied smartly against the U.S. currency today, notching up a handsome recovery of 50 paise to close at 45.74/76 a dollar, backed by strong exporter dollar sales in volatile trading at the interbank foreign exchange market.

Undergoing a sharp upward correction from overnight 11-month closing low of 46.24/26, the rupee opened at 46.23/26 and barring initial blips when it dipped to 46.32/34, robust exporter dollar sales, led to heavy unwinding of long overbought dollar positions by banks, dealers said. The rupee touched an early high of 45.92/96, before strengthening further to 45.74/76 at the close, a forex dealer said. After trading hours, it was quoted even higher at 45.70/72, he added.

Prior to today's smart rally, the rupee had depreciated by over 127 paise or over 2-1/4 per cent since June 9, dragged down by persistent heavy dollar demand amidst dwindling dollar supplies.Sentiment for the rupee appears to have turned for the better after the recent slide to 11-month low, but cautious traders were reluctant to predict the immediate future trend. The RBI fixed the reference rate for the U.S. currency at Rs. 46.06. The rupee also strengthened against the forward dollar on renewed exporter dollar sales in the futures segment, sending premiums tumbling across the board.

Forward dollar premiums nose-dived on a fresh wave of hectic receiving interest by exporters after some corporates and importers had initially resorted to sell-buy swaps.

"A sudden pull-back rupee rally in the spot market, induced exporters to sell forward dollars in late trade, pushing down premiums across all maturities," a dealer said.

— PTI

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