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Thursday, Mar 25, 2004

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Forex dealers look for more rupee volatility

Rukmani Vishwanath

Mumbai , March 24

FOREX dealers on Wednesday were torn between watching the India-Pakistan cricket series finale, and taking advantage of the sudden surge in the value of the rupee to make a quick buck.

As the swift appreciation in the rupee has bestowed the `kiss of life' to the domestic forex markets after a prolonged dry spell over the past few months, currency traders want to squeeze the situation for all its worth.

Although the movement in the rupee has been only one-way so far i.e., that of appreciation, forex dealers are eagerly awaiting some more volatility in the domestic currency, as it represents opportunities to make good profits.

The 21-paise appreciation in the rupee against the dollar on Tuesday finally broke the tedium for many forex dealers, who have been coming to grips with the monotony in the narrow movement of the domestic currency over the past few months.

Mr R.V.S. Sridhar, Vice-President and Chief Dealer, Money and Forex, UTI Bank, said, "In a sense, this appreciation in the rupee has given a window of opportunity to make some quick gains.

`But of course, you have to be on the right side of the market, or you will end up making losses instead. Volatility will make things interesting." With March-end drawing near, there is also anticipation of importer demand for the greenback picking up in the market, which is expected to help the rupee swing the other way, even if only briefly.

"What we are looking for are windows of opportunity. The rupee has been in such a tight range, with hardly a 2-3 paise movement, that there was not much scope to make any gains.

"Any dealer can make thumping profits in only volatile markets," said a forex analyst with a foreign bank.

In this past week alone, the rupee has appreciated by 50 paise to close at 44.75 on Wednesday.

Over the past few days, the spot dollar market has been clocking volumes of anywhere between $1.50 billion and $2 billion, according to currency experts.

"This appreciation in the rupee has been long overdue.

"If the RBI does not come in to support the dollar, the rupee will appreciate much more sharply. For now, it looks like it will continue to appreciate at least for the next couple of months," said Mr Shah Rukh Wadia, Head Treasury, IndusInd Bank.

So what do dealers do when the markets are dull like they have been in the recent past?

"We sit back and watch cricket," quipped a dealer with a new-age private sector bank.

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