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Rupee crashes by 28 paise

The Indian rupee crashed to a new low of Rs 37.72/78 against the American greenback on Friday, plummeting heavily in the last half-hour of trading as market hopes of a possible Reserve Bank of India intervention turned sour.

The rupee dropped by 28 paise.

The fag end of the session witnessed a free-for-all, with panicky client-covering by banks and uncontrollable dollar demand from corporates.

The rupee opened at Rs 37.45/47 per US dollar. Routine business demand pushed it down to Rs 37.50 in the early hours of trading. Leading forex dealers said the market was hoping for the RBI to intervene and sell dollars. Had there been such a move, they said, it would have sent positive signals and arrested the rupee's downfall.

However, market hopes were belied, and in the end, major banks, including the State Bank of India, started buying dollars in the spot section heavily. The rupee fell to Rs 37.85. But on nominal RBI selling in the last minutes of trading, the Indian unit settled down at Rs 37.72/78.

"Outright dollar deals were choppy and volatile, while the forward section was quiet," a forex dealer said.

The monthly premia in paise were 1-2 for November, 24-27 for December, 50-52 for January, 70-73 for February, 95-98 for March, 116-121 for April and 137-142 for May. The one year forward was quoted at 239-243 paise at the fag end of trading.

"What is happening right now is a correction in the value of the rupee. The RBI wanted it to settle at the 37.50 level, but due to some strange quirk, the rupee found it position lower today," a senior forex dealer with a foreign bank said.

Bankers, meanwhile, were optimistic that the downslide is temporary and the Indian unit would not suffer the same fate that befell South-East and East Asia.

The Union government's decision to free the petroleum sector controls by year 2001-02 and phase out the administered price mechanism over the next four years will see the major oil companies resorting to dollar buying in the local forex market. This may push the rupee even lower, dealers said.

However, they added that as changes in the oil sector would be spread over many years, the impact on the rupee may not be so severe.

Trading in the overseas markets was range-bound and dull.

Back home, pound sterling closed at Rs 63.60, German mark at Rs 21.61 and Japanese yen at Rs 30.05.

Elsewhere, the RBI fixed the reference rate at Rs 37.47 per US dollar.

UNI