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Mumbai, Oct 8: The rupee dropped
sharply against the dollar on Monday to finish at a
new closing low of 48.1250/48.1350 after news of US
attacks on Afghanistan. Government securities (G-Secs)
prices dropped by nearly 50-75 paise in early trades
in reaction to the rupee fall as traders lightened their
portfolios to hedge against risk in anticipation of
a further drop in prices during the day.
After opening the day weak at 48.05/07
per dollar, the local currency depreciated rapidly in
early trade as banks bought dollars in panic. The rupee
touched an intra-day low of 48.2100/2300 per dollar.
“It was nothing other than panic demand in early trade
that there was such high demand,” said ICICI Bank’s
senior vice-president (domestic treasury), Narendra
Gupta.
“However, a statement from RBI’s governor Dr Bimal Jalan
helped to relax some of the panic in the forex market
and the rupee recovered from its intra-day lows,” Mr
Gupta said.
Dr Jalan on Monday stated that the US-led air-strikes
on Afghanistan would have little impact on the Indian
economy, adding that the central bank was watching the
situation. Dr Jalan also indicated that softer interest
rate bias would continue.
On depreciation of the rupee, Dr Jalan said the external
situation was comfortable right now and orderly conditions
would be maintained in the forex market, adding that
RBI is there to meet the temporary demand and supply
imbalance.
“After the initial panic, demand eased at around 10.30
in the morning, supplies from state-run banks also helped
to control the rupee fall,” a dealer with a foreign
bank said.
“Later the rupee recovered following Dr Jalan’s comments,”
the dealer said adding that: “The rupee will continue
to trade in a 10-12 paise range if there are no major
changes on the war front as the market seems to have,
to a certain extent, discounted most of the factors.”
Forward premiums rose on the back of weakness in the
spot rupee. Dealers said players invested in long-dollars
sighting a further depreciation in the rupee. In month-wise
premiums, the October dollar traded at 16.5/17.5 paise,
while in the far forwards, the January dollar traded
at 92/94 paise with the September dollar at 287/289
paise.
However, G-Secs prices trimmed some of its early losses
after RBI reiterated that its stance on softer interest
rates would continue and the central bank would keep
a check and take necessary steps to prevent any sharp
fall in the rupee.
Trades in the G-Secs market were relatively thin and
cautious. The 11.50 per cent 2011A opened the day at
Rs 115.00, dropped to Rs 114.80 in intra-day trades
but recovered to Rs 115.20 in late trade. The call market
was the only market which did not show any reaction
to the US attacks news. Call rates were relatively easy
throughout the day. Call rates opened at 7.00-7.25 per
cent and ended the day at 7.00-7.10 per cent.
Related stories:
Second
wave of US-led strikes hit Afghanistan
Security
beefed up in Mumbai
Pak
protests turn violent
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