Rupee slumps to historic low

By Our Special Correspondent

MUMBAI, SEPT. 10. The rupee dipped to an all time low of Rs. 47.35/36 a dollar due to heavy corporate demand.

Earlier during the day the rupee opened slightly lower at 47.27/28 against Friday's close of 47.255/265 and immediately took a downward course on mounting dollar demand. It briefly pulled back to 47.2625/27 on dollar offers by some State owned banks but overwhelming demand drove it progressively lower to ``uncharted territory beyond 47.30". After hitting a new low against the dollar at 47.355/36, it made a transitory recovery to 47.31/32 as dollar offers from a few State-run banks prompted fresh dollar selling by some foreign banks.

``The rupee sank to a new low during post-lunch session as corporate demand for dollars not only grew but also seemed unrelenting," said Mr. N. Subramanian, forex consultant, eMecklai, a leading foreign exchange dealing firm. ``The rupee might remain under pressure in the following session unless large capital inflows from foreign funds augment the dwindling dollar inflows,'' he added.

Meanwhile, Dr. Bimal Jalan, Governor, Reserve Bank of India, said nominal interest rates were declining and the environment was positive. He also said that India's exchange rate policy was realistic and sound and it should continue to maintain realistic exchange rate policy and manage our external sector in a way that it was insulated from upheavals or shocks from abroad as far as possible.

Analysts feel that when RBI Governor states ``realistic level'' market will search for what the real level is. The rupee seemed to be overvalued in real effective exchange rate (REER) terms by little over one per cent that means the rupee has got more room to decline, they believe.

Forward premiums hardened on persistent paying interest prompted by weaker spot rupee and also easing U.S. interest rates. While the benchmark six-month premia closed flat at 4.71 per cent, the 12-month premia ended at 4.87 per cent as compared to Friday's close of 4.80 per cent.

After opening a little higher at 7 to 7.15 per cent as compared to Saturday's close of 6.90 to 7.05 per cent, call rates remained steady and closed unchanged.

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