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Rupee declines further

The Indian rupee breached the psychological barrier of Rs 36.50 in a panicky and volatile trading, as corporates and banks scrambled to cover their positions in anticipation of the rupee falling even further on the likely demand by oil companies in the aftermath of the oil hike.

Heavy Reserve Bank of India selling in the spot and forward section could not save the situation as heavy corporate demand and outward remittances by market players to repay import obligations did not allow the Indian currency to recover.

The rupee opened at Rs 36.47/50, and touched a low of Rs 36.52. It closed at Rs 36.50/51, showing a net loss of 1 to 3 paise compared to Tuesday's ending.

"The knee-jerk reaction to the oil hike is needless. The oil companies will not enter the market. The possibilities are that they will raise funds from other sources. In fact, Indian Oil Corporation has managed to mop up US dollar 600 million from overseas by way of a syndicated loan," a leading forex dealer said.

Selling by the apex bank was continuous in both spot and futures market. The RBI was selling heavily for October, November and February and has reportedly sold about $90 million on Wednesday.

Cash spot closed at 0.25-0.50 paisa premium. Tom spot ended at 0.00-0.25 paisa premium.

The six-month annualised premia touched an all-time high of 8.50 per cent, up from 7.90 per cent on Tuesday. The monthly premiums in paise were 16-19 for September, 41-43 for October, 63-65 for November, 90-92 for December, 112-115 for January, 131-133 paise for February and 152-154 for March.

In overseas trading, the US dollar showed a divergent trend against the major currencies, dealers said.

Back home, the British pound opened at Rs 58.05 and closed at Rs 58.09 against the rupee. Japanese yen and German mark closed at Rs 30.11 per 100 units and Rs 20.03 respectively.

Elsewhere, the RBI fixed the reference rate at Rs 36.50 per dollar from Rs 36.47 on Tuesday.

UNI