• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

The rupee has fallen "very low" against the US dollar, but this appears to be an aberration, says the Union Commerce and Industry Minister, Mr Kamal Nath. "We have allowed rupee to move from 39 to 46 against the dollar. We should not calibrate. Not calibrating it shows the strength of our institutional systems and that the best practices have been adhered to in Asia".

Our Bureau

Mumbai, Sept. 16 The turbulence in the global equity markets echoed not only in the domestic equity markets, but also in the currency market, with the rupee crashing by 90 paise in intra-day trade on Tuesday.

“The fall was mainly due to the global crisis in the credit market, which is affecting the equity market and also the rupee. Foreign institutional investors are taking out their money nowcausing a dollar outflow,” Mr Dilip Raghuwanshi, forex advisor with Asit C Mehta Forex Private Ltd., said.

The rupee inched close to the 47 levels, last seen in July 2006. However, dollar selling by public sector banks, perhaps on behalf of the Reserve Bank of India, supported the rupee to some extent, said forex dealers.

The rupee opened at 46.05 and moved one-way downward to the day’s low of 46.97/98. It closed at 46.90, against the previous close of 46.04/05. The arbitrage in the unofficial overseas non-deliverable forwards market was also a reason for the fall.

“FIIs who want to hedge in rupees cannot do it in the spot market due to regulatory restrictions. So they do it overseas . Even other Asian currencies such as the Taiwan dollar and Korean won are seeing the impact of this NDF arbitrage,” Mr Raghuwanshi said.

According to Mr Parthasarathi Mukherjee, President, Treasury, Axis Bank, there were bunching up of demand from importers and cancellation of orders by exporters.

“The rupee will not remain at these levels, but when it will rebound is hard to say,” he said.

The forward premia also declined, with the six month closing at 1.03 per cent (1.63 per cent) and the 12-month at 0.92 per cent (1.31 per cent).

The inter-bank call rate touched an intra day high of 14-14.5 per cent in day trade on tight liquidity conditions. Call rates ended higher at 11-11.5 per cent, against the previous close of 10.50-10.60 per cent. Advance tax outflows are also causing a liquidity crunch in the market, said a dealer with a private bank.

The advance tax outflow is estimated to be around Rs 35,000-40,000 crore.

The Reserve Bank is also injecting huge amounts into the system through the liquidity adjustment facility.

In the past two days, it has infused close to Rs 1,09,000 crore through the repo.

The US Embassy also announced it had changed the consular exchange rate from Rs 46 to Rs 48 against a dollar.

This rate change would apply to all rupee-denominated costs of applying for visas and passports, including the non-immigrant visa application fee

More Stories on : Forex | Financial Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line