MUMBAI, Dec 15: The foreign exchange market reacted negatively to the Reserve Bank of India governor Bimal Jalan's statement that there is "no fixed band for the rupee" and that the current market determined rate is "reasonable".

The spot rupee weakened from 39.55 to 39.70 after the governor made the statement, dealers said. "I feel there will be no positive impact of his statements today. He has made no new statements or announced any new measures," a dealer in a foreign bank said. According to him, the rupee might test the 40 barrier tomorrow.

However, treasury chiefs feel that the apex bank will defend the 40 level "vigorously". PH Ravikumar, executive vice president, ICICI Bank, said that the rupee will not appreciate. "I expect the rupee to rule between 39.50 and 39.75 till January," he said. According to him, only in January will the correct level of inflows be determined apart from a clearer picture about the emerging political scenario.

Ravi Kumar said the RBI measures -- announced on December 2 -- has had a negative impact on the securities market and trading volumes have been decreasing. Call rates today breached the 9 per cent barrier and prices of short-term securities fell with some medium-term securities also reacting.

"Some banks did avail of the refinance facility," a money market dealer in a private bank said. Dealers pointed out that the governor's statements are "contradictory" to some extent. " He said that the present level of the rupee is reasonable but he has no fixed target in mind. It is contradictory.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.