Re plunges below 43.50 level

Jalan said on Wednesday the central bank was closely monitoring the situation in the foreign exchange market.“The RBI is closely monitoring the situation and will take appropriate measures as and when considered necessary," an RBI official quoted Jalan as saying. The rupee has declined by 102 paise against the dollar during last 19 days of this month. It has reported a steep decline of Rs 3.80 since April 30 against the greenback.Shankar Acharya, chief EconomicAdviser in the finance ministry, also expressed concern. “Whenever the Reserve Bank of India governor expresses concern, naturally we in the finance ministry are also concerned,” Acharya said.

As if this was not enough, State Bank of India sold approximately $ 30-50 million to prop up the rupee after buying the greenback in initial part of the day. “Overall there is a general mood of gloom,” said a dealer at a private bank. “Bad news is getting spaced out, one day it is East Asia, the next it is South East Asia or Russia. There is nothing to reverse the poor sentiment,” he said.

The rupee crashed against the dollar despite finance minister Yashwant Sinha’s statement that the recovery in Japanese yen will be beneficial for the Indian economy and the worst is over now, dealers said. SBI’s dollar sales after the RBI governor’s statement partially arrested the rupee’s slide. There was good corporate demand for the greenback. “Oil companies and a host of large private sector companies were in the marketbuying dollars,” dealers said.

SBI sold dollars thrice on behalf of the RBI to stem the fall. Dealers said that the SBI sold around $ 30-50 m today. Earlier in the day it bought dollars. “Dollars inflows are poor… sentiment on the rupee is poor with the worsening political situation and a rouble crisis,” a dealer in a brokerage said.

Commenting on the rupee’s slide, tax expert H P Ranina said that the steep decline in the value of the Indian rupee, if allowed to continue, will have a crippling effect on the Indian economy with far-reaching consequences on the social and political fabric of India.

The six-month annualised forward premium closed at 9.40 per cent, up from Tuesday’s 9.01 per cent.“There was quite a bit of paying in the longer maturities. A few corporates were also seen receiving and paying later…but exporters are holding back,” dealers said. Dealers said that the SBI was paying in the forward market earlier in the day.With the rupee falling day after day, bankers are now expectingthe RBI to come out with some measures to arrest the fall. As the dollar inflow is expected to pick up, RBI might opt for steps to tighten the liquidity, dealers said.

Fresh RBI package likely
MUMBAI: The Reserve Bank of India (RBI) is likely to come out with a package of measures to stem the rupee slide. The measures are likely to squeeze the liquidity in the banking system which will, in turn, lead to higher interest rates.

When the rupee came under pressure earlier this year, the RBI had announced a host of measures including a hike in the cash reserve ratio. These measures were later removed as soon as the rupee stabilised against the dollar.

The central bank officials are unlikely to remain spectators to the daily fall in the rupee’s value. “The RBI is likely to effect structural changes instead of selling dollars from the forex kitty,” RBI sources said.

Expecting an RBI package, several foreign banks sold government securities on Wednesday as any package will lead to further fall insecurities prices. Most of these banks were arbitraging between the government securities market and forex market by buying dollars and earning a huge spread.