"It was a volatile day with the spot rupee opening at 45.81. It kept falling to hit the day's low 45.91/92. Then the Reserve Bank of India (RBI) announced measures to curb volatility," said a dealer with a private sector bank.
As part of its measures to curb volatility in the market, the Reserve Bank of India, in its circular released in the morning, said, "balances in excess of 50 per cent lying in the exchange earners' foreign currency (EEFC) accounts scheme should be converted to rupees by August 23". The apex bank estimated the total balances under the scheme to be around $2.0 billion.
"The RBI's move had the desired effect on the rupee and it started coming off to settle in the range of 45.71 to 45.75," the dealer said. "The demand was relatively less after the RBI's measures, with supply coming in a steady stream," he continued.
The RBI reference rate was 45.77 on August 14, as against 45.93 on August 11.
The apex bank decided to take these measures as the rate hikes had not been very effective. These measures had the desired effect on the rupee.
On Wednesday, the rupee is expected to remain in the range of 45.60 to 45.75. "We think the rupee will stabilise in and around 45.50," said a dealer with a foreign bank.
The forwards tracked the spot rupee, also closing higher. Far forwards closed about 10 paise higher while near-term forwards closed about 5 to 7 paise higher.
The premium on the six month (annualised) closed at 4.06 per cent as against 4.60 per cent earlier. Nationalised banks were seen receiving quite a lot, so the supply was relatively adequate even before the RBI circular was issued.
On Wednesday the forwards are expected to track the spot rupee with premiums coming off by a few paise.
