The Hindu Business Line : Rupee breaches 44 mark vs $

EVERY trading day seems to mark a new closing high for the Indian rupee. The domestic currency touched a near four-year high with the deluge of dollar supply to end the day at 43.60/65 in its value against the dollar. The currency gained 46 paise or over 1 per cent from its previous close.

Even after the official market hours, stray deals were done with further rise in the domestic currency to 43.50 levels on the last day of the current fiscal year.

With limited intervention from the RBI and little demand for the greenback from corporates, the rupee touched as high as 43.33 in the course of the day, a movement of over 70 paise intra-day.

Since the domestic markets were closed on Tuesday the bunched-up supplies of the dollar flooded the market today. The FII inflow into the recent six PSU divestments is seen as one of the primary reasons for the current dollar rain. The no-holds-barred appreciation of the rupee started in the latter half of March in which it has gained 3.7 per cent in its value against the dollar.

Meanwhile, a senior Government official today stated that the appreciation of the rupee would be temporary. According to analysts, RBI may be lacking the adequate instruments to take control of the heavy dollar supply currently being witnessed in the market and effectively stem the rise of the domestic currency. This stance of the regulator might however change as the new fiscal commences and the central bank floats the market stabilisation bonds. These stabilisation bonds will help curb the rupee liquidity that gets enhanced each time the central bank buys dollars in the foreign exchange market.

Once the stabilisation bonds hit the debt markets, RBI might step back into the forex markets to actively mop up greenbacks, said a forex analyst. When RBI buys up dollars it releases the equivalent amount in rupees. To mop up these rupees the central bank is to issue market stabilisation bonds worth Rs 60,000 crore in the coming fiscal.

Government securities, the much-required instruments to contain the rupee's rise, are fast shrinking in the RBI's kitty. These instruments are required not only to mop up the rupee liquidity in the system, but also to give in exchange for funds the apex bank sucks out daily through the repo window. RBI has been sucking out funds worth over Rs 50,000 crore on a daily basis through the repo facility in recent weeks.

The forwards market was relatively quiet today with the premia lowering a tad. The six months forward ended the day at 0.85 per cent and the one-year closed at 0.68 per cent.