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Rupee gains by Rs 1.20

The rupee opened at Rs 39.50-80. There was heavy demand from banks and corporates before the midsession, which seemed to subside as trading progressed during the day. The rupee touched an intraday high of Rs 38.90 against the dollars.

Bankers attributed the rupee's rally to speculators adopting a wait-and-watch approach in the wake of the liquidity squeeze as a result of RBI's measures and good quantity of inward remittances by exporters.

Demand was observed during the period after the midsession when the rupee was quoted at Rs 39.73. The Indian unit was holding at Rs 39.25 for a little while. Eventually, the Indian currency closed at Rs 38.95-39.05, showing an impressive gain of Rs 1.20.

Another reason advanced by dealers for the rupee's rise was the high overnight interest rates prevailing in the money market. Covering cost for 2-3 day's which would otherwise have shot up due to high call money rates, but was not quoted today since the New York market was closed.

Forward premiums spurted due to the squeeze in availability of rupee funds due to RBI's measures. Swap differences for a few months showed a spread of as high as 30 paise. Monthly premiums (in paise) were 40- 46 for January, 105-125 for February, 160-190 for March, 195-225 for April, 235-265 for May, 283-310 for June and 315-345 for July.

The overseas markets witnessed hectic activity as the dollar gained ground against the mark also which weakened against the yen and pound.

Back home, the pound sterling closed at Rs 63.78, Deutsche mark at Rs 21.42 and Japanese yen at Rs 30.16 (per 100 units).

Elsewhere, the RBI fixed the reference rate at Rs 39.51 as against the previous fix of Rs 40.36.

UNI