Speculators drive down rupee further

MUMBAI, Nov 26: Even as the Reserve Bank of India (RBI) made desperate bid to contain rupee's descent, the Indian currency plunged by anoth...

MUMBAI, Nov 26: Even as the Reserve Bank of India (RBI) made desperate bid to contain rupee’s descent, the Indian currency plunged by another 25/30 paise to close at yet another low of Rs 38.55/60 against the dollar. Speculators seem to have taken firm control of the Indian currency at the inter-bank foreign exchange market as the rupee has slid 7.95 per cent since its pre-crisis time in August this year.

The Reserve Bank bid to stem the rupee slide by pumping in $ 100 million in the spot market and another $ 250 million in forwards was proved futile.Sources in the central bank say that it has sent out inspectors to eight big market makers in the foreign exchange market. The banks include: ANZ Grindlays Bank, Standard Chartered Bank, Canara Bank, Citibank, Societe Generale and Global Trust Bank. The possibility of State Bank being in the list could not be ruled out, but this could not be confirmed.

Opening weaker at Rs 38.45/48, the rupee slid further due to massive demand from Indian companies. The inter-bank activity hit a record of Rs 38.71 against the dollar. “The RBI intervention in the spot market saw the rupee rally to the Rs 38.55/60 level,” said a dealer.

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Said an RBI spokesperson: “Speculators have taken over the Indian currency and the rupee is unnecessarily being driven down.”

“The inspectors check the book of accounts of these banks and see whether it was genuine demand that drove the rupee down or otherwise. Through the records we will also note the corporates that were demanding dollars from these banks,” source in the RBI said. The RBI move is to curb excessive speculation in the market.

Ex-governor C Rangarajan had last week warned against the overshooting of the rupee and said that the rupee weakening was due to the “speculative elements”. However, the market expects the new Governor Bimal Jalan to make a statement. “We are hungry for a comment from him as this will act as a psychological cushion and the rupee is bound to stage a rally,” said a dealer.

Continuing its strategy to cool down the spot rupee, the RBI conducted swaps in various forward maturities. “The RBI conducted swaps for maturities in January, February, March, April and May to take the pressure of the rupee. This, however, did not have the much desired impact and it had to intervene in the spot market to pump in $ 100 million,” dealers said. RBI had embarked on this strategy since Monday to keep forex reserves intact and also leaving money supply alone.

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The RBI strategy to conduct swaps in forwards saw the forward premium cooling across all maturities. The six month forwards closed at 6 per cent – down from 6.5 per cent – premia for January closed at 40/43 paise, February to 60/63 paise, March 80/83, April 99/102 paise and May at 115/120 paise.

Gold too slides

LONDON: Spot gold price continued to slide on speculative selling in Europe Wednesday, reaching a new 12.5 year low of $ 295 a troy ounce, after dipping below key psychological support at $ 300 a troy ounce in Asian trading, said traders.