RBI steps in to check Re rise

The quantum of RBI intervention could be as much as $700-800mn.

The rupee opened at a six-year high of 43.13/15 to a dollar today but the euphoria over the revaluation of the Chinese currency quickly died down with heavy intervention by the Reserve Bank of India.

The rupee closed sharply lower to the dollar at 43.50 against its Thursday closing of 43.15. The quantum of RBI intervention could be as much as $700-800 million, dealers said. Finance minister P Chidambaram said there would be no change in the exchange rate management policy of India.

"The Chinese (currency) revaluation is marginal and will not have any major impact on the Indian financial markets," he said. The government bond prices fell across the board by 15 paise.

Chidambaram assured the financial market saying there was surplus liquidity in the system. RH Patil, one of the RBI monetary policy committee members, said that economy is stable.

Dealers across the market expects the rupee to appreciate. 'The Indian unit may rule at 43.10-15 to a dollar by the end of this month,' said Bank of India's Chief Dealer Pawan Bajaj.

While the intervention tackled the spot rupee from further appreciation, heavy dollar sale by exporters led to a crash in premiums on the forward dollars. Six-month and one-year annualised forward dollars closed at 0.96 per cent and 1.02 per cent, respectively, against 1.40 per cent and 1.22 per cent, yesterday.

Almost all the major Asian central banks intervened to check their currencies from appreciating beyond a point.

The Singapore dollar opened at 1.6520 against the US dollar but closed at 1.6608. Similarly, Korean won closed at 1024.80 after opening at 1020.50, Japanese Yen closed at 111.10 after opening at 109 and Thai bhat closed at 41.34 after opening at 40.40.