RBI, SBI step in to save Re

The apex bank has been pumping in rupees and selling the greenback through swap transactions over the past10 days through a concerted attempt.

“Today’s RBI move is a classic example of text book micro management to save the currency,” a forex head in an European based bank said.

The RBI, according to forex dealers, is once again trying to make domestic funds dearer so that the cost of holding funds overseas turns out be less attractive. The rupee threatened to cross 39 today when the SBI — on RBI’s behalf — stepped in to sell spot dollars. The State Bank, which has been a net buyer in the forex market, sold about $ 40 million to stem the fall of the rupee.

The apex bank conducted swaps across various maturities which led to the forward premia rising. "The RBI intervened for $ 60 million," a chief dealer in a European bank said. Six-month premia rose by 300 basis points today to close at 16.50 per cent and February premia (annualised) closed at 22 per cent. The spot rupee gained 20 paise over yesterday’s close of 38.92 against the dollar to close at 38.72. Opening at 38.92/95, rupee lost groundsteadily and traded at 38.97 before the State Bank stepped in to sell dollars.

Forward premia rose after the Reserve Bank intervened and paid forwards maturing in February and March. While six-month forwards rose to 16.5 per cent — up by 300 basis points — one-month forwards rose to 22 per cent and one-year forwards firmed up to 14.25 per cent from 12.62 per cent (annualised).