rediff.com: Rupee plunges to new low of 44.76/$ -- June 9, 2000

The Indian rupee slipped to a new low of 44.76 to the US dollar. It had held steady at 44.72/44.73 levels earlier in the day, trading in a narrow range, with state-run banks providing adequate supply of dollars to meet import demand, dealers said.

However, after dropping to 44.78/44.80 levels in afternoon trades, it clawed back to close at 44.75/$.

Dollar demand was moderate and more from importers uncertain about the rupee's next move, they said.

The rupee was quoted at 44.765/78 per dollar at 2:00 p.m. It opened at 44.73/75 and dipped on early dollar bids before the state-run banks started selling, dealers said.

"Export supplies are still thin. They still will like to see a certain level being protected fiercely before selling, a dealer with a private bank said.

The rupee had recovered from record intra-day lows of 44.95 on Thursday where the Reserve Bank of India, or RBI, intervened verbally with a strict warning against speculation and directive to offload all positions.

Yesterday, the rupee stabilised in a narrow range on, off earlier highs, in quiet trade after the central bank imposed restrictions on positions.

It opened weak on Thursday at 44.73/75, slipped to a low of 44.95, where the Reserve Bank of India, or RBI, intervened verbally warning against speculation and asking banks to unwind dollar positions.

After touching a new all-time low of Rs 44.95/96 per dollar during intra-day trading, the Indian rupee bounced back immediately, following Reserve Bank of India's indirect intervention at the inter-bank foreign exchange market on Thursday morning.

Dealers said the RBI's statement caused the rupee to firm to levels around 44.54/60, but there was some import demand at those levels.

The State Bank of India, or SBI, also bought dollars, possibly to indicate too much of a retracement was not encouraged, dealers said.

Dealers said the RBI had asked many market participants to provide information on transactions during the volatile morning hour.

"According to market information, they were few transactions of small value while the price was being moved sharply higher by some banks. This indicates that the inter-bank activity this morning, despite RBI's repeated reminders, seem to be speculative in nature," the RBI said in its statement to the market.

"RBI has instructed banks to maintain square position for the day. If necessary, RBI will intervene directly in the market," it said.

Dealers said this being the second time the central bank had intervened at the break of the 44.75 level, the market will treat it as a resistance level for the dollar.

The RBI statement had indicated only sudden sharp movements were discouraged, not a gradual decline, dealers said.

"I hope the restriction on holding positions is only for today. Even for a quarter million corporate transaction, I am being forced to go to the market," a dealer with a French bank said.

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