The pain continues for rupee as it hits fresh lows versus the dollar. The Reserve Bank (RBI) steps are not working and maybe now the market is bracing for more tightening from the RBI and perhaps for some big bang announcements from the government, says CNBC-TV18's Latha Venkatesh.
The rupee was expected to start on a back foot today because of the dollar strength versus emerging market currencies, but nobody was quite prepared for this kind of a fall in the rupee.
The dollar was marginally stronger compared to some Asian currencies like the won or the Malaysian ringgit, but that is marginal 0.3-0.2 percent. In India, it was about over a percent stronger than the rupee. The previous all time low of the rupee 61.20/USD was an watershed mark, she added.
Once rupee breached that level, corporates who had not covered for near-term imports, just rushed in. This also perhaps clicked the stop loss boxes for foreign institutional investors (FIIs) as many of them bought forward dollars. So, the forward rate also jumped from about 7.5 percent to 8 percent, going up from Rs 4.60-4.70 paise all the way to nearly Rs 4.85 paise for a one-year forward and that would make it about 8 percent.
Interbanks also covered for their clients. In the forward market, at about 61.78-61.80/USD levels some bit of selling of dollars was seen - either people were unwinding positions on their own or maybe the RBI showed its hand – there was a minor amount of PSU banks offering dollars.