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The rupee gained by over Re 1 after the Reserve Bank of India announced measures to curb speculation in the forex market.
The domestic currency was trading at 52.81 at 1.00 pm. It had surged by 145 paise to 52.21 against Thursday’s close of 53.66.
As part of its steps to curb speculative positions building in the forex market, the RBI had withdrawn the facility to cancel and rebook forward contracts by resident and foreign institutional investors.
According to Mr Moses Harding of IndusInd Bank, RBI’s aggressive measures on the forex market will provide stability in rupee at 52-54. This level is seen as fairly valued for exporters and will not be considered as inflationary with good signs of downtrend in commodity prices.
However, as a consequence of the RBI’s steps, liquidity has been impacted, said a dealer with a public sector bank.
“Banks are not able to quote bigger amounts because of the reduction in the net overnight open position limit of banks. So, as a result the bid-offer spreads have also gone up. While the spreads were around 1 paise, now they have gone up to 2-3 paise, in some cases even 5 paise. The RBI may do something or else the forex market could see huge see-saw kind of movements,’’ he said.
The bid-offer spread is the difference between the prices quoted for an immediate sale of dollar (offer) and an immediate purchase (bid).
The rupee’s movement will depend on the dollar demand. Even a slight increase in demand could lead to dollar appreciation.
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