Rupee up 74 paise against $ after RBI steps in
16 Dec 2011
The free fall of the Indian rupee against the dollar was checked slightly today after the Reserve Bank of India imposed restrictions on forward trading. The rupee, which had tumbled to a record low of Rs54.30 per dollar on Thursday, gained 74 paise to Rs52.90 per dollar in opening trade on Friday
After the market closed on Thursday, the RBI reduced trading limits for banks in the foreign exchange market, making it difficult for market players to keep speculative positions open for a long time.
The RBI also sold dollars through public sector banks on Thursday.
A higher opening in the equity market ahead of the RBI's credit policy review later in the day and gains registered by other currencies against the US dollar supported the rupee's rise.
The rupee had gained 7 paise to close at Rs53.64/65 per dollar on Thursday after witnessing a record low of Rs 5.30 during the volatile session (See: Rupee freefall continues; crosses Rs54 per dollar mark).
The RBI had dictated that banks must square up their dollar positions by the end of Thursday. This has been enforced by reducing the net overnight open position limit for banks. On forward contracts, RBI said all such deals booked by both exporters and importers will henceforth be on a fully deliverable basis. If any participant is forced to contract the forward contract, he will not be eligible to receive any exchange gain.
During the current year, the rupee has fallen by more than 18 per cent. The sharp depreciation has made crude imports more expensive and threatens to add to inflation.
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