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SBI checks rupee plunge through heavy $-selling; Rs 43.42

• Rs 43.42 vs $
• Rs 46.39 vs euro
• Rs 69.68 vs pound
• Rs 37.62 vs yen (100)

The Indian rupee tested an intra-day low of Rs 43.5850 to the US dollar, the lowest in the last one year, but bounced back on State Bank of India's dollar-selling and closed five paise higher at 43.40/42 at a volatile interbank foreign exchange market today.

The rupee opened slightly higher at 43.47/49, came under pressure due to constant corporate dollar demand and lack of support from the central bank. It crashed to Rs 43.5850 level around noon, which is the lowest since August 19, 1998. However, in the afternoon, the Indian currency got a boost after SBI, apparently on behalf of the Reserve Bank of India, started pumping huge amount of US dollars into the system.

The rupee not only recovered its initial losses, but also closed higher by six paise at Rs 43.40/42, as against Rs 43.46/48 of the previous day on SBI's dollar selling support. SBI sold about $ 200 million today, forex dealers said.

The Indian rupee continued to fall for the last three weeks, despite the ending of the border crisis, due to the rise of the oil prices, which led to dollar demand. Forex inflows from the foreign institutional investors have also been diminishing ahead of the election.

Heavy covering by importers in the near term payables, and sustained greenback purchases by state-run firms, also put pressure on the rupee. The Indian unit witnessed a continuous downtrend, touching the low of 43.580 in intra-day today before closing at 43.40/42 as against Rs 43.20/21 of July 20.

Tracking the spot market, premia on forward dollar also moved up sharply initially, but eased later on scattered receivings by nationalised banks. The six-month and annualised premia closed slightly higher at 4.71 and 5.01 per cent respectively.

Cash/spot and cash/tomorrow premia finished at 0.85-1.25 paise and 0.50-0.75 paise respectively. The month-wise premium in paise were: August 9.5-11, September 25-27, October 40-42, November 56-58, December 75-77, January 96-98, February 113-115, March 132-134, April 152-154, May 171-173, June 190-192 and July 210-212.

Meanwhile, the Reserve Bank of India fixed the reference rate for US dollar at Rs 43.54 as against 43.45 of the previous day.

In the cross-currency, the rupee ended higher against pound sterling, euro and Japanese yen. It closed against sterling at Rs 69.68 (70.16), euro at Rs 46.39 (46.68) and yen at Rs 37.62 (37.85).

At the domestic money market, the overnight interest rates closed higher at 8.90-9.10 per cent on subdued liquidity conditions, coupled with good demand for funds.

UNI

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