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Peace talk, border skirmishes confuse market, push rupee down, Rs 43.04 vs $

The rupee weakened further by about six paise against the greenback as confusion prevailed over the Kargil issue. While the Indian government agreed to talks with Pakistan, skirmishes continued on the border. This contradictory situation affected the market sentiment at a fairly active interbank foreign exchange market today.

The rupee opened steady at Rs 42.97/98, immediately slid to 43.03/04 in the morning on heavy dollar buying by corporates as early morning air-strikes at the border made the marketmen panicky.

However, later, the news of the positive response from the Indian government to have bilateral talks with Pakistan on June 12, cooled down the iniitial anxiety.

The rupee rose to the opening level around noon as the greenback demand slowed down for sometime. But heavy fresh short covering by banks again put pressure on the rupee, pushing it down towards close.

The Indian unit ended about six paise lower at Rs 43.03/04 as against Rs 42.9750/9850 of the previous day's close. Dealers said the market witnessed relatively good acitivity today and was very sensitive to each and every developments at the border.

Unlike in the capital market, the news of Indo-Pakistan talk on June 12 gave a boost to the rupee just for sometime, but slid back again later, they added.

Forward market witnessed relatively dull activity and premia eased slightly in the absence of paying pressure and scattered receivings. Importers were covering only urgent requirements, dealers said.

Near forwards eased by 1-2 paise while far forwards ended by 3-4 paise lower. The sixth month and yearly annualised premia ended lower at 5.22 per caent and 6.02 per cent as compared to 5.31 per cent and 6.12 per cent respectively.

Cash/spot premia ended at 0.75-1.00 paise while cash/tomorrow finished at 0.25-0.50 paise. The month-wise premia in paise were: June 9-10, July 26-28, August 45-47, September 64-66, October 85-87, November 105-107, December 125-127, January 155-157, February 180-182, March 206-208, April 229-231 and May 252-254.

Meanwhile, the Reserve Bank of India revised the reference rate for US dollar at Rs 42.98 as against Rs 43.01 of the previous day.

In the cross currency, the rupee declined slightly against euro while it remained nearly steady against pound sterling and Japanese yen. Euro ended at Rs 44.67 (Rs 44.26), sterling at Rs 69.03 (69.05) and yen at Rs 35.47 (35.50).

At the interbank call money market, the call rates ruled in a narrow range between 7.95-8.10 per cent level throughout the day and closed a bit lower at 7.95-8.05 per cent over its previous day's close of 8.00-8.10 per cent.

UNI

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