MUMBAI, Nov 7: The free fall of rupee continued on Friday on sustained covering by corporates and banks even as the six-monthly forwards went on a rollercoaster ride. The Indian currency which closed at Rs 36.4575 against the greenback on Thursday dipped further to cross the 36.50 level and touch a low of 36.58 on Friday. Subsequently, it closed at 36.53/54.

Six-month forwards climbed to 7.40 per cent - up by 20 basis points from the previous day.

The central bank refrained from intervening in the forex market although it made periodic enquiries. RBI governor C Rangarajan had said that the central bank will intervene only "if there is a high degree of volatility".

"The rupee went on a rollercoaster ride," a dealer said summing up the day's currency movement. The rupee opened at 36.50/52 and continued to lose ground as there was no end to the corporate demand for dollars. "There were quotes at 36.58/59 as corporates went to cover all their urgent exposures," a dealer with a private bank said.Dealers said that most of the day's trading were inter-bank and there was no degree of speculation. "This is probably one of the reasons why the Reserve Bank did not intervene in the market," a dealer said.

The weakening in the rupee is being attributed to tapering off of capital inflows towards the end of the year. "Foreign institutional investors' inflows will dry up by December so the rupee will continue its process of gradual weakness," NS Paramasivam, treasury head, at Essar Group said. "The FIIs will start booking profit and remitting funds and that may trigger a further fall of rupee. Only in January, when the new allocation for funds comes in, the rupee will start appreciating," Paramasivam said. "There may not be any end to rupee weakening if the fiscal target continues to remain under pressure," a dealer in a foreign bank said.

Treasury chiefs are attributing the weakening forwards to the pressure on the macro-economic fundamentals. The rupee greeted Bimal Jalan's appointment as RBI governor with lukewarm response. Players in the foreign exchange market said that the "appointment of a known reformist to head the country's central bank will have a positive effect on the rupee". "The market welcomes Jalan's appointment and although the news did not trigger any unusual movement in the market, his image as reformist will help the rupee," a head of a corporate treasury said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.