Opening around 42.25/30 per dollar, modestly lower from the overnight finish of 42.22/24, the rupee plunged to an intraday low of 42.42/45 on persistent demand for dollars from banks in the absence of dollar selling by the State Bank of India (SBI) in support of the rupee.

The rupee, however, later recovered lost ground on dollar selling by companies and hovered around 42.30/35 for the better part of the day's business. "The rupeerecovered because of profit booking by banks and selling by a few exporters," a treasurer at a British-based bank said.

Towards the fag end, the SBI renewed its active dollar offers and with other banks unwinding long dollar positions, the rupee initially rallied to 42.26/29 and then settled at a new low of 42.23/28 at the end of trading hours.

The forward premium rose today giving an indication that the rupee might strenghten. The six month annualised forward cover opened at a high of 10.65 per cent as compared to Tuesday's close of 10 per cent. However, it closed at 9.67 per cent."I think this is a good time to start receiving premium," ING Bank's country treasurer Atul Sahasrabuddhe said. Cash/spot business was conducted at 0.75-1 paise premium while cash/tom was done at 0.35-0.65 paise.

The monthwise premium in paise for June was 17-19 paise, July 54-58 paise, August 84-89 paise, September 119-122 paise, October 152-156 paise, November 14-188 paise, December 220-224 paise, January 257-262 paise,February 293-298 paise, March 331-336 paise, April 359-365 paise and May 389-397 paise.

The Indian unit remained almost steady against pound sterling, Deutsche mark and Japanese yen and quoted 69.00 for sterling, 23.70 for DM and 30.10 for yen. Meanwhile, the RBI maintained its reference rate for US dollar at Rs 42.15.

Experts rule out 44.25 level in 6 months

The rupee is not expected to quote at 44.25 to the greenback half a year down the line as the current six-month annualised premium at 10 per cent levels seems to suggest, a cross section of leading forex experts say. The local currency fell to 42.25 on the 8th of this month from 36 on 22 August'97: a slide of 16.58 per cent on an absolute basis and 20.50 per cent on an annualised basis.

But treasurers reason that this precedent of a sharply falling rupee came in a year when external factors like the south-Asian crisis, a general review of emerging economy risk and the Dow appearing to breach the 10,000 mark affected the market. FII saleshere were interpreted more as result of doing them badly in the rest of Asia.

"Given this, to expect a fall to 44.25 in the rupee's value by December'98 as the six-month annualised premium implies appears to be exaggerated," said senior dealers. As ING Bank's country treasurer, Atul Sahasrabuddhe says categorically: "There is no need to panic. What we may finally see is a yearly rupee depreciation of not more than 5-6 per cent at the maximum. In fact, I think it is a good time to start receiving premiums".