Re gains, RBI defends rise

The forex market was quite volatile amid thin trades as 32 banks — all public sector and a few old private sector banks — participated in the industrial strike. The strike was called by the Trade Union Joint Action Committee (TUJAC) to protest against the new economic policies of the NDA government at the Centre.

“We feel that the way the exchange rate has moved is quite adequate in relation to the international movement between currencies,” RBI Deputy Governor Rakesh Mohan said in Bangalore on the sidelines of a conference. “The comments have reinforced our view that the rupee is likely to strengthen in the near term,” said an analyst, adding, “Today’s bounce-back is because of lack of volumes and broad market participation, and I would wait for tomorrow to see the response to the comments.”

The rupee opened stronger at 46.88/89 from the previous close of and rallied to 46.7650/77 level on dollar inflows. However, with the exporters buying dollars to pay in the forward market following a big-ticket export cancellation, the rupee moved down to 46.80 level. A few co-operative banks were also seen buying dollars at lower level. The repeated bout of dollar buying in a thinly traded market caused the volatility, dealars said. Though public sector banks were mostly off the market, some banks were seen buying dollars at 46.80 level. But dollar buying by corporates and exporters pushed the rupee to 46.85/87 level. It has gained nearly 2.5 per cent this year after rising 0.55 per cent in 2002, its first appreciation in more than 10 years. Forward premia opened the day with continued receiving interests from exporters. Market sources said that a large-volume export was cancelled and that forced the exporters to buy forward dollars. The one-year annualised premium closed at higher at 4.36 per cent as compared to the previous close of 4.35 per cent.