Rupee loses despite EEFC measures

NetScribes/Janaki Krishnan

The $1-billion inflows from exporters' EEFC accounts did little to stem the rupee slide on Thursday, which closed at Rs 45.92 to a dollar on renewed dollar demand from importers. The intra-day low was 45.96.

Foreign exchange dealers expect the rupee to slide even further. Said the chief dealer at UTI Bank, "Rather than any actual figure, we see the rupee to stay range bound between Rs 45.75 and 46.25 vis a vis the dollar."

The perception in the market is that the Reserve Bank of India would be more comfortable in not letting the rupee go beyond 46-levels. At any level below this, even importers would not be interested in booking fresh contracts, a forex dealer at Corporation Bank said. One-month forward premiums is now at a level of seven per cent while the one year forward cover is averaging at 4.6 per cent.

Sampath Kumar, chief forex dealer, Karnataka Bank, said that the most in most likelihood, the central bank might abolish the EEFC scheme altogether. "This will then force the exporters to bring in all their dollar retentions back into the country", he said.

The market has been talking about RBI holding on to the dollars which the exporters have brought in. This was however discounted by forex dealers who said that this would be a self defeating process. "It is quite possible that RBI will monitor the actual inflow of dollars into the system," said the UTI Bank dealer.

A section of the market feels that they should just ride out the current slide in the rupee. "Though we cannot say that we foresee any bottoming out, we definitely see a dwindling demand for dollars from corporates," said Kumar. Once the demand peters out, the rupee will find its own level.

On Thursday, the rupee opened at Rs 45.90, strengthened to 45.86/87 before it went into a tailspin, ending the day considerably weaker.

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