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Border tensions spread to forex market; rupee crashes 28 paise to Rs 43.10 to $

Fears of an escalation in the Kargil conflict between India and Pakistan following the air-strikes launched by the Indian Air Force against Pakistani infiltrators impacted on the interbank foreign exchange market.

The players turned panicky; at the end of the day, the rupee lost a whopping 28 paise to the US $.

The rupee opened lower at Rs 42.89/91 to the dollar. It hovered at Rs 42.90/91 at mid-session as covering by participants was matched by fresh supply of the greenback.

However, as soon as the news of shooting down of Indian jets reached the market, the rupee went into a tailspin by 1545 hrs IST, and plunged to Rs 42.95.

The downward trend continued and the rupee went down further to 43.05 and subsequently to 43.11/15. The rupee eventually closed at 43.10, showing a net loss of 28 paise from the previous close of 42.8250/8350.

The forward premia also perked up across-the-board with the six-month annualised premia ending at 5.97 per cent. The monthly premia (in paise) were 22-24 for June, 43-46 for July, 64-68 for August, 85-89 for September, 105-110 for October and 128-133 for December.

''The rupee will be on a southward journey if tensions between the two countries don't subside'', opined a forex dealer at a leading bank.

''The rupee seemed stable, but the corporates and importers rushed to take cover after the news filtered in and this led to the crash,'' said a senior dealer at a foreign bank.

Cash/spot ended at 2.50-3.00 paise, tomorrow/spot at 2.25-2.75 paise and cash/tomorrow at 0.50-1.00 paise.

The Reserve Bank of India fixed the reference rate at Rs 42.90 per dollar as against Rs 42.81 yesterday.

The rupee ended at Rs 68.60 a pound sterling, 35.18 a yen and 44.96 a euro.

UNI

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