Re plunges below 42 mark

Dealers said the regional uncertainties had cast a shadow over the rupee, but that was not the main reason for its fall. According to a dealer with Mecklai Financial Services, the rupee went lower as State Bank did not sell dollars today. For most of the last week, State Bank’s dollar sales had set a floor for the rupee at 41.80 levels, which gave waytoday.

According to another dealer, dollar inflows were weak, but demand is strong. "FIIs have been selling shares and are repatriating funds. The spot rupee came under pressure as a result," he said. The fall of the yen against the dollar and the continuing pressure on other South-east Asian currencies also cast a shadow on the rupee.

With this fall, the rupee has fallen by nearly six per cent after May 13 when India conducted nuclear tests. The crash gathered momentum when the US and other countries announced sanctions against India. In fact, exporters and others were demanding a rupee-dollar level of 42 for quite some time.

The rupee fall occurred even as Finance secretary Montek Singh Ahluwalia made a statement that the Reserve Bank was "doing very well" in regulating the country’s foreign exchange market. But it did little to change the sentiment on the rupee.

Ahluwalia added "The Reserve Bank has all the resources to prevent any speculative upsurge in the foreign exchange market. We should notfocus too much on the rupee. The truth is that in these days, there is a lot of foreign exchange volatility."

Even though Finance Minister Yashwant Sinha also tried to talk up the rupee, it did not have the desired impact. Sinha said the government was committed to ensure orderly conditions in the forex markets to prevent speculative pressures on the rupee and is closely monitoring the situation arising out of the yen’s depreciation against the dollar.

Sinha asserted in the parliament that government was in a position to face any speculative challenge on the rupee following dollar hardening against the yen and pressures on other East Asian currencies. He ruled out pegging the rupee at any particular level and said it was continuing with the earlier regime’s practice of letting its value be judged by the market.

"The government will ensure that macro-economic fundamentals are in place and economy remains sound as part of its efforts to guard the rupee against any undue pressure, and conditions at theforex markets remain orderly without undue speculative pressures," the minister said.

"The government would prefer to maintain the stability of the markets instead of stability of the rupee," Sinha said.