Rupee plunges below 43 mark

MUMBAI, Aug 12: Even though the Japanese yen staged a strong recovery, the Indian rupee plunged below the 43 level to touch an all-time l...

MUMBAI, Aug 12: Even though the Japanese yen staged a strong recovery, the Indian rupee plunged below the 43 level to touch an all-time low of 43.35 against the US dollar at the inter-bank foreign exchange market here on Wednesday. The Reserve Bank of India and State Bank of India prevented the rupee from crashing further by selling dollars. As a result, the rupee closed at 42.95/43.05.

The RBI is reported to have pumped in 75-100 million to prop up the rupee in a damage control exercise after panic gripped the market. 8220;Corporate demand for the greenback surged on fears of further weakness in the local currency and other Asian economies,8221; said a dealer.

Opening the day at 42.92/93, a shade weaker from its overnight close at 42.86, the rupee went lower to 42.95/98 levels soon thereafter. State Bank of India sold dollars at this point helping the rupee recover to 42.84, quot;but the respite was short livedquot;, said Mecklai Financial Services senior vice-president K N Dey.

However, renewed corporate dollardemand at 42.84 saw the rupee cross the 43 barrier. The rupee hit the all-time low of 43.35 immediately, thereby forcing the Reserve Bank to intervene. Market estimates of central bank intervention ranged between 75 and 100 million. This helped the rupee close at 42.95/43.05.

Said ING Bank8217;s treasury head, Atul Sahasrabuddhe: 8220;there was quite a bit of panic in the market8230; news of another round of currency devaluation in the Asian region seems to have upset sentiment.8221;

According to Standard Chartered Bank8217;s chief forex dealer, Sharukh Wadia, 8220;While other Asian currencies gained today, the market8217;s mood indicates a weaker rupee.8221; The Japanese yen quoted 145.10 147, Korean won at 1,330 1,340, Malaysian Ringett at 417 426 and Singapore dollar at 71.50 73 against the dollar.

The statement of Chinese ambassador to India Zhou Gang that it will be forced to devalue its currency yuan if the Japanese yen and other South-east Asian currencies continued their free fall gave a fillip to the bearishview on the rupee. The political uncertainty in the wake of AIDMK supremo J Jayalalitha8217;s threat of withdrawing of support to the BJP-led government at the centre also added fuel to the panic striken market, dealers said.

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The forward premium on the dollar went up tracking a weaker spot rupee and slightly firmer call rates at 7 per cent. The six-month annualised forward cover closed at 9.02 per cent, higher from Tuesday8217;s finish at 8.20 per cent while the one-year went at 9.58 per cent 9.02 per cent. The one-month annualised forward premium closed at 8.11 per cent compared to its overnight quote at 5.64 per cent, two months at 8.71 per cent 6.59 per cent and three months at 8.99 per cent 7.27 per cent.