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Rupee ends at a record low of Rs 43.55/58

The Indian rupee finally broke the Rs 43.50 barrier, hitting an historical intra-day low of 43.65 and closing at a new record low of 43.55/58 against the US dollar on all-round dollar demand amidst volatile interbank foreign exchange (forex) market today.

The choppy forex market witnessed heavy panic dollar buying by corporates and banks to square up their positions, mainly on speculation caused by the devaluation of Russian rouble, which pushed down the rupee further southwards to hit a record low of 43.65 in the intra-day.

The rupee crashed against the dollar despite Finance Minister Yashwant Sinha's statement that the recovery in Japanese yen will be beneficial for the Indian economy and the worst is over now, dealers said.

The State Bank of India's dollar sales after the Reserve Bank of India governor's statement partially arrested the rupee's slide.

The RBI governor in a statement said that the Central Bank is closely monitoring the situation and will take appropriate measures as and when considered necessary.

The Indian unit opened nearly steady at 43.35/38 level, it moved only downwards till afternoon to touch the lowest-ever level of 43.65 in the noon. Thanks to the heavy dollar sales by SBI, the rupee reversed and closed at Rs 43.55/58, still eroding its value by about 20 paise as compared to the previous close of 43.35/38.

The call rate quoted around eight per cent in the interbank call money market. The cash spot traded between 1.00 and 1.25 paise premium and six-month annualised premia was quoted at 9.18 per cent. Meanwhile, the Reserve Bank of India has fixed the reference rate per US dollar at Rs 43.42, 16 paise higher against the previous fix of Rs 43.26.

The rupee lost by 20 paise to Rs 43.55/58 against the previous day's close of Rs 43.35/38.

The rupee has been declined by 102 paise against the US dollar during last 19 days of this month (see graphic). It has reported a steep decline of Rs 3.80 since April 30 against the greenback.

Commenting on the rupee's slide, eminent economist H P Ranina said that the steep decline in the value of the Indian rupee, if allowed to continue, will have a crippling effect on the Indian economy, with far reaching consequences on the social and political fabric of India.

While delivering a speech on the sliding rupee and currency crisis' in Bombay, Ranina said that the erosion in the value of rupee wipes out a substantial part of the nation's wealth, which has to be measured in terms of the dollar, the currency which the competitive world goes by.

According to movements monitored by the RBI, the rupee opened at 43.37/40 which happens to be the day's high, touched the day's low of Rs 43.62/69 and ended at Rs 43.49/54.

Dealers said the rupee slide was mainly due to heavy speculative dollar buying based on rumours and added that the improvement in the Asian market and the stronger yen were the positive factors, and did not have immediate positive impact.

Describing the trading in the forwards, dealers said that the movement in spot rupee reflected in the forward. Forward dollar premiums moved up on good import booking and high paying pressure. The 3rd month, 6th month and yearly annualised premiums were quoted higher at 9.23 (9.17), 9.08 (9.01) and 9.49 (9.36) per cent respectively.

Cash/spot business were conducted between 1 and 1.5 paise premium while cash/tomorrow were done between 0.50 and 0.75 paise premium. The month-wise premiums in paise were: August 10-13, September 45-49, October 76-81, November 108-114, December 144-149, January 175-180, February 206-211, March 244-249, April 281-287 and May 315-322.

The Reserve Bank of India has revised the reference rate for US dollar at Rs 43.42 as against Rs 43.26 of the previous day.

In the overseas market, the dollar remained nearly steady against sterling, a bit stronger against deutsche mark and weakened against Japanese yen. The rupee weakened against sterling, dm and yen and was quoted for sterling at Rs 70.50 (70.01), for DM at rs 24.17 (24.12) and for yen rs 30.13 (29.77).

In the domestic money market, the call money interest rates opened steady at 7.75-8.00 per cent, ruled in the range of 7.50 -8.10 per cent most part of the day and closed at 7.50-7.65 per cent.

UNI