Mumbai, Aug 4: The Reserve Bank of India continued to prop up the dollar and bought roughly $200 million in the forward dollar market on Monday. Far forward dollar premiums shot up as a result of the RBI's purchases.

Six-month dollar premiums ended at 4.6 per cent over the spot rate after topping 4.7 per cent in intra-day trades.

The RBI's purchases were mainly in October dollars, dealers said. The RBI also bought November and December dollars, they added. Premiums in these months shot up by four to eight paise when the RBI intervened. There was also talk that the RBI bought January dollars.

The premiums, however, dipped towards close. October dollars ended at 35 paise over the spot dollar from the day's high of 38-39 paise, dealers said. This is the second consecutive day the RBI has intervened heavily in the forward dollar market. On Friday, the RBI purchased a similar amount in the forward market, which led to the firming up of premiums. Six-month dollar on Friday shot up from the opening level of 3.75 per cent to end at 4.20 per cent following RBI's intervention.

The intervention also prompted importers to come in and transact forward contracts. In the spot dollar market on Monday, the rupee strengthened at close to 35.74-35.75 to a dollar. Opening firmer at 35.76-35.77 compared with the previous close of 35.78-35.79, the rupee gained strength on good selling by exporters. The demand for spot dollars could continue on Tuesday because banks that were hit in the forward market on Monday will cover in spot on Tuesday.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.