MUMBAI, Jan 13: The rupee almost sank to the Rs 40 level against the US dollar at the inter-bank foreign exchange market here on Tuesday as panic gripped the market with the rupee touching an all-time low of Rs 39.94.The State Bank of India (SBI) sold dollars in sizeable amounts which saw the rupee appreciate to Rs 39.87/89. The Reserve Bank, however, kept away from the spot market, but intervened in the forward market and conducted swaps for July maturity.
Dealers said nervousness gripped the spot market due to the meltdown in the South-East Asian currencies. ``Importers are rushing in to buy dollars because they are not sure where the rupee will head because of the South-East Asian crisis. The situation is being further fuelled by the fact that exporters are not selling dollars as they expect the rupee to cross the 40 barrier soon,'' a treasury head in a foreign bank said.
The gradual movement of the rupee towards the Rs 40 barrier today was interrupted by the SBI as it sold dollars, reportedly underinstructions from the RBI. After opening at Rs 39.80/85, the Indian unit lost ground steadily after corporates continued to cover for their exposures. Dealers said that had the country's largest bank not intervened in the market and sold dollars, the rupee would definitely have touched Rs 40. ``SBI was intervening passively in the market, selling dollars to banks which were approaching it for dollars. It was selling dollars at Rs 39.87/89 for sometime after which it stopped,'' a dealer in a private bank said. The rupee immediately lost ground and deals were struck at Rs 39.92 before the SBI once again started to sell dollars in the spot market. This saw the rupee strengthen and close at Rs 39.87/89.
Dealers say if the RBI does not intervene tomorrow the Indian unit could touch the Rs 40 barrier. With the market remaining thin due to RBI strictures to banks imposing overnight limits and bringing nostro accounts within the 15 per cent investment ceiling, a slight demand for dollars is leading the market to gohaywire. The RBI intervened in the forward market and conducted swaps for July maturities.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
