On Wednesday, the spot rupee was quoted at 42.60/65 in the overseas market, while the rupee recovered on Friday on thin trades to 42.61. The six-month forward rupee in the offshore market was quoted at 45.15/45.45 per dollar, while in the domestic market the six-month rupee was quoting at 44.12. "There is a huge gap to arbitrage but a bank needs funds for this," a dealer said, adding that the Reserve Bank's measures curb such speculative activity. The one-year rupee in the offshore market was quotingat 47.10/80 while in the local market the one rupee traded at 46.07 per dollar on Wednesday.

Banks which are quoting such low rates include the overseas branches of Indian banks and foreign banks. Dealers said that with trades being thin the difference between the buy and sell quotes were wide.

Bankers said that there were no quotes in the domestic currency market on the Thursday and Friday. The rupee had weakened by 13 paise on Wednesday to a ten week low 42.56/57 after the Economic survery released by the Government on Wednesday said that there was case for devaluation of the rupee to make exports more competitive. The Survey said that the capital flows would be lower in 1999-2000 and the exchange rate has to be flexible and pragmatic approach has to be taken about the rupee's value to ensure export competitiveness. This along with political uncertainity and the bunching up payments ahead of the banks' strike led to a weakening in the rupee. The offshore market has in the past remained one of thebiggest sources of speculative activity with corporates and foreign banks making hay by arbitraging between the domestic and foreign-currency markets. The considerable weakening of rupee in this market might have an impact on the rupee when it opens for trading on Saturday, forex dealers said. "These are ominious signs as it has been seen that a weakeness in the rupee in the domestic market starts with the weakeness in the overseas market. However, trading in the market is very low as the Reserve Bank's measures on August 18,199 curb banks speculative activity to a large extent", a forex market dealer said.