MUMBAI, Nov 23: Speculators in the foreign exchange market who had so far remained confined to the non-delivery forward (NDF) segment have now shifted focus to the spot market.The Reserve Bank of India is likely to intervene in a large dose to keep the speculators away from the spot market.

Friday's 15-minute burst of intense speculation saw the spot rupee losing ground by 35-40 paise. With this, the Indian unit has been depreciated by 5.5 per cent since August 19 when the rupee was ruling at 35.70. In fact, so intense and sudden was the entry of the speculators that the Reserve Bank was also caught off-guard and took time to intervene. However, sources say the RBI has identified the "bunch of speculators" and is likely to deal with them suitably on Monday. In the NDF market where corporates have been arbitraging between the forward maturities in the domestic market and the foreign markets based in Hong Kong and Singapore has seen one-year forwards flaring up. The RBI has continously been hitting banks by intervening in these maturities and stopping such speculation."The same action is called for in the spot market if speculators are to be kept away," a forex analyst in a leading brokerage said. Dealers point out that in a thin market where two players like the State Bank of India and the Reserve Bank dominate, speculation is bound to be rife.

"The new RBI governor Bimal Jalan has to deal with the speculators firmly to ensure that the currency markets are not taken over by speculators as happened in the east Asia," a treasury chief in a foreign bank said.

In a late damage control exercise, the apex bank did issue a statement last week saying that "speculative elements dominated the market towards the end of trading due to non-economic development".This is perhaps the first time that the Reserve Bank admitted that "speculative elements" do exist in the currency markets in India. Although corporates point out that political instability led to sudden weakening of the rupee on Friday, it is widely felt that a few corporates along with banks moved in tandem to make a fast buck.

"A lot of banks are making hay during such volatility. The Reserve Bank is likely to hit them through a strong dose of intervention," a currency dealer at a private sector bank pointed out.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.