There is a widespread feeling among market participants now that the Reserve Bank of India (RBI) is on the verge of announcing a strong set of measures to clamp down on the markets. There is an expectation that the rupee is set to cross Rs 46 to a dollar level today. On July 21, the RBI had hiked the bank rate by one per cent and cash reserve ratios by 50 basis points, and had cut the refinance limits in a bid to force the rupee down.
The rupee opened at around 45.62, then it slipped to touch an intra-day low of 45.86. Dealers said there was strong demand from a large financial institution and a British bank. Banks started covering their short positions after realising that the recovery in the rupee on Wednesday was temporary.
On Tuesday, the spot rupee hit an all time low of 45.73 before bouncing back to levels of 45.62 on Wednesday due to good dollar sales by exporters, who till then had been holding back from selling their receivables.
"Most people had been expecting the rupee to strengthen yesterday after Wednesday's recovery but that wasn't the case," said a dealer with a private bank.
"The fear is spreading again after the shortlived respite on Wednesday."
Forward premiums tracked the rupee with the six-month annualised premiums being dealt at 4.84 per cent. Dealers see little respite for the rupee now on account of continued dollar demand as more corporates enter the market to cover their exposures. Forward premiums are expected to tread even higher as the rupee weakens.
"Most corporates have already hedged their imports or are seriously considering doing so," said the treasury head in a private bank.
"The expectation is there now that the rupee is going to weaken further and that is going to put even more pressure on the spot."
