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Mumbai , Nov. 19

IT was a backbreaking day for many a dealer in the local currency markets with the rupee exhibiting a yo-yo like movement. Despite the dollar taking a major beating worldwide on Tuesday and several Asian currencies strengthening against it, the reverse was seen in India with the rupee weakening against the dollar on the back of domestic developments.

The rupee saw an upward movement of 13 paise in early trading on limited dollar supplies followed by a downward movement of 16 paise to end the day at 45.64. The rupee has lost 22 paise in the first three days of this week despite having gained 4.9 per cent since the beginning of this calendar year.

There is a view emerging that the central bank is responsible for the present volatility in the forex market. "They have sucked out as much as $150 million- $200 million per day, this week. The RBI has been mopping up dollar liquidity for two years now but its actions are creating so much impact now because there are limited FII supplies coupled with corporate demand and inter-bank short coverings too," said a treasury head of a private bank.

The RBI's motive seems to be to put importers/forex borrowers on the back foot, say dealers. Most Indian corporates continue to leave their foreign currency liabilities unhedged since they are betting on an appreciating rupee observed for over two years now despite repeated warnings from the RBI on the exchange rate risk involved.

The rupee today ended the day at 45.64 against the dollar after opening the day at 45.60 and touching an intra-day high of 45.47. On Tuesday the rupee had closed at similar levels of 45.63/64.

Many a treasury head confess to having no view on the Indian rupee while a section of dealers expect the depreciation to continue till November-end on the typical month-end demand. These are the very same people who were earlier professing values of 45 and even 43 for the rupee against the dollar.

Could this be the reversal of the tide? Most currency watchers do not feel so. FII interest in the stock markets are expected to revive and continue and the rupee is still under-valued on a trade-weighted basis are their arguments.

In the forwards market, the six-month forward closed at - 0.10 per cent (-0.13 per cent) and the one-year closed at 0.20 per cent (0.23 per cent).

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