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Journalism of Courage
The Indian rupee today came down preciously close to the psychological 50-level mark at 49.90 intra-day as the lingering Eurozone crisis further pushed up the demand for dollar globally.
The domestic currency,however,bounced back to end the day 14 paise up at 49.43/44 which the treasury managers and forex dealers attributed to the Reserve Bank intervention twice during the day.
Treasury managers said the rupee may further come down to the sensitive 52-mark,if not breaching this level,in medium term unless Europe stablized.
In a see-saw trade at the Interbank Foreign Exchange (Forex) market,the local unit opened lower at 49.60/61 and later plunged to a low of 49.90– a fresh more-than 28-month low level– on continuous signs of fund outflows and sustained dollar demand from importers,mainly oil refiners,and some banks.
Meanwhile RBI Deputy Governor Subir Gokarn in New York said intervention in the forex market,if any,would be limited to curbing volatility,but as of now,the situation does not call for any action even though the rupee has fallen to its weakest level in 28 months.
“We,at this point,do not see any intervention from a rate targeting view point. That is something that would reflect a change in policy stance,which we are not doing at this point,” he said
StanChat Treasury Head Ananth Narayan,said it certainly looked like RBI intervened in the market twice in the day– at 49.85 in the morning trade and brought it down to 49.10 and also later at 49.50. Had it not been RBI’s role,the rupee would have breached the 51-mark today.
In last straight four trading days,rupee has declined by 231 paise or 4.89 per cent.
The falling rupee is a serious concern for policymakers as it could further push up inflation,given that the country imports about 80 per cent of its crude oil requirement.
Economists have suggested that the central bank should intervene to halt the sharp depreciation of rupee,especially considering its anti-inflation stance.
An official at the Kotak Mahindra Bank treasury,however,said there has not been any disorderly movements in the markets to warrant RBI intervention. There is no flight of capital from the country so far. Moreover,RBI’s forex intervention is a complex issue and can create lot many other problems,he said,adding Kotak’s range for rupee is 46- 49.
Commerce Secretary Rahul Khullar warned exporters,who rejoice at rupee’s fall as their dollars get them more money,aginst “getting too greedy and buying derivatives”.
“Hedge your (exporters) risks,do not get too greedy and for Christ’s sake this time be more careful. Do not go to bank and buy derivatives about which you have no idea,” he said.
Expecting the rupee to remain volatile he said: “If you (exporters) are getting Rs 48 (to a dollar),take and run. Do not wait for Rs 50 or Rs 52.
In 2007,exporters bought complex foreign exchange derivative products from banks,burning their fingers in the process.
Narayan too said the market will remain volatile for the short-term but does not see the local unit breaching the 52-mark,”I do not think RBI will let that happen. It has enough tools to avert such a fall. For the medium term,I see the rupee gaining from the current lows and closing the year well above the current levels. But I don’t see any visible solution in the medium term,” he added.
Dhanlaxmi Bank Treasury Head Manish Sarraf said it is too early to comment on the sensitive 52-mark. Unless there is some stability in the euro,the fluctuation will continue.
“I see the rupee touching 50 soon and do not think the pain is over as yet. It seems the RBI has PSU banks selling dollars,as the market saw some steady correction,” he added.
The Indian benchmark Sensex,meanwhile,today closed down by almost 200 points or 1.22 per cent over its abrupt fall of 704 points yesterday. FIIs pulled out USD 252.88 million yesterday.
The dollar index of six major currencies was up by 0.08 per cent while New York crude oil was trading above USD 78 a barrel in European market today.
The RBI fixed the reference rate for the dollar at Rs 49.6730 and the euro at Rs 66.9815.
The rupee premium for the forward dollar improved further on sustained paying pressure from banks and corporates. The benchmark six-month forward dollar premium payable in February rose to 87-91 paise from Thursday’s close of 85-88 paise and far-forward contracts maturing in August also firmed up to 126-130 paise from 122-126 paise previously.
The rupee also recovered against the pound sterling to settle at Rs 76.23/25 from Thursday’s close of Rs 76.43/45 and also recouped to Rs 66.43/45 from Rs 66.69/71 previously. It too turned positive against the Japanese yen to end at Rs 64.81/83 per 100 yen from last close of Rs 64.98/65.00.
