``The RBI squeezes liquidity when inflation is rising or there is pressure on rupee. On both accounts, the trend is downwards. At present, there is no undue pressure on the rupee and the inflation is actually falling. In January 1998, the rupee plummeted and RBI had to intervene to prevent its fall which was due to speculative pressure. RBI stepped in and squeezed liquidity which we we do not see happening in January 1999,'' said Dileep Madgavkar, Head Fixed Income, Prudential ICICI AMC.

Madgavkar said that while the growth of money supply is still on the higher side, we do not see the money supply increasing. ``We see no radical movement in the yield curve in the near future. The situation is different this time around. The rise in inflation is due to various bottlenecks likeuneven rainfall and flooding which led to a supply-demand imbalance of essential commodities leading to a rise in inflation which has been streamlined now,'' said Madgavkar, adding that some slippages due to a shortfall in revenue receipts was anticipated but would not cause a major move because liquidity in the system would be able to contain it.

``A repetition is highly unlikely because the avenues for speculation on the rupee are very few now. The only position banks can take is 15 per cent of the Tier-I capital on the overseas money market instruments. The RBI has cancelled contracts for rebooking,'' said Sridhar Narayan, head fixed income, ITC Threadneedle Asset Management Company.

``This time around, the fall in rupee in due to actual merchant demand in the market. This shows that RBI is willing to drawdown the reserves, which can be seen from the fact that the foreign currency reserves of RBI for the week ended November 27 has gone down by $ 42 million and the weeks preceding that have gone down by$ 100 million showing that there is actual demand in the economy with avenues for speculation limited,'' said Narayan.

Explaining as to what happened on January 16, 1998, the vice-president of a private sector mutual fund said that the speculation aspect was magnified in January 1998. ``The rupee was already sliding when it was further hammered due to excessive speculation. RBI in its credit policy in October has categorically stated that they would intervene at any point of time. In January, the shock of contagion of the South East Asian currencies had accentuated the problem,'' he said.

``This year if there is a turmoil in comparative currencies, a smaller version of the January 16 situation can happen. But unless RBI gives a big shock by giving out never given figures or there is a comparative currency crisis again, such a situation is unlikely to emerge,'' he added.

The managing director of Canbank Asset management company mirrored the same sentiment. ``At present market liquidity is good with forexrates settling to stable levels. Thus, we do not see any tightening emerging in the near future as the situation now is not comparable to the circumstances prevailing before January 16, 1998. There is no knee-jerk situation and unless something major happens, we do not see a January 16, 1998 episode occurring in January 1999,'' said Hegde.