MUMBAI, November 17: The rupee slipped to a new 21-month low of Rs 36.89 against the dollar despite the Reserve Bank of India's (RBI) intervention in the inter-bank foreign exchange market here on Monday. Even though the RBI pumped in an estimated $150-200 million, it could not stem the volatility in the market.

With this, the Indian currency has depreciated by two per cent over a span of three weeks. On October 26, the rupee closed at Rs 36.15/19 and subsequently it went on a roller coaster ride to lose nearly 75 paise.Opening at the Rs 36.75/77 level, the rupee started weakening in the early hours of trading to cross the Rs 36.80 level. ``The Reserve Bank intervened at this level and sold dollars,'' said a dealer. However, the intervention hardly had any impact as the rupee continued to slide and touched Rs 36.85. At this level again the Reserve Bank sold dollars to prop up the Indian unit. This time also there was no impact and the rupee fell further to close at 36.87/89.

There was no perceptible change in the RBI stance vis-a-vis the rupee, sources said. The central bank will allow the market forces to determine the value of the rupee and intervene only to rein in the volatility.

``Insufficient intervention by the Reserve Bank led the rupee to weaken to a new low,'' a dealer in a private sector bank said. Treasury heads are also pointing out that a certain degree of political instability is leading the rupee to weaken. However, they were unanimous that there will not be a sharp decline in the rupee. ``There is no panic in the market. It is the corporate demand which has triggered the fall,'' said a treasury head in a leading company.

Finance minister P Chidambaram's statement about the need for a cautious approach towards capital account convertibility made in New Delhi also added to the bearish sentiment. ``All the hype and hoopla associated with CAC seems to have gone and this a new message that is being sent about CAC. It will definitely have an impact on the rupee,'' he said.

A bank dealer said politics had little to do with the rupee's weakening on Monday. ``It is just that realisation is setting in that dollar has only one way to go,'' he said, adding that Indian firms which never bothered to cover their risks were buying dollars. The demand for dollar was rising but supply appeared to be on the wane. The forward market also saw a great degree of volatility. Opening at 7.17 %, stronger than Thursday's closing level of 7.6 per cent, six-month forwards weakened to 7.4 per cent before the RBI intervened to sell dollars. This had a cooling effect and six-month forwards closed at 7.17 per cent (annualised).

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.