The last time the forwards dipped below the 7 per cent mark was on May 8 when the six-month forward premiums (annualised) closed at 6.68 per cent. The six-month forward premiums on Wednesday closed at 6.75 per cent after opening at 7.5 per cent.

The spot rupee appreciated to cross the 42.50 mark to close the day at 42.45/46. On Tuesday, the spot rupee had closed at 42.50/52. "There was hardly any demand from importers as they are expecting the rupee to appreciate," a dealer in a private bank said.

"There was a lot of receiving at the beginning of theday as the State Bank and other large public sector banks began selling dollars in the forwards. Only a few foreign banks were paying," a dealer said.

While announcing the package, Hegde said that the interest rate reduction from 11 per cent to nine per cent on pre- and post-shipment credit was a temporary facility and would be available till the end of the current financial year.

According to the commerce minister, the reduction was effected as exporters had cited high cost of export credit as a major reason for the difficult export performance which registered a negative eight per cent growth in the first quarter (April-June) of the current fiscal.

Earlier, the Reserve Bank had tried to provide concessional credit of 6.5 per cent to exporters to be calculated with the base year as 1997-98 but could not take off as banks faced operational problems in implementing the scheme.

"The forward rupee will strengthen," a dealer said. The one-month forward closed at 3.65 per cent (4.50 per cent), thethree-month one closed at 5.5 per cent (6.1 per cent) and the one-year one closed at 8.17 per cent, down from 8.50 per cent on Tuesday.

INSIGHT
Rupee will look up

The new package of measures designed to promote exports may or may not have the desired effect. But forex dealers are of the opinion that sentiment in favour of the rupee will certainly improve immediately as a result of the announcement. Expectations of inflows from Resurgent India Bonds have strengthened the rupee in recent weeks, and once the inflows start coming in forwards may dip even further, at least in the short run.