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Sudden demand, short-covering hammer down rupee; down ten paise, Rs 42.45/46

Sudden demand pressure from corporates and importers coupled with short-covering by banks led the rupee into a tail-spin, allowing it to shed 10 paise against the greenback at the interbank foreign exchange market today.

Opening unchanged from the previous closing levels at Rs 42.35/37, the Indian unit rose in early trading to Rs 42.33/34. However, demand from banks, notably State Bank of India, allowed the rupee to plummet during the day. The rupee ended at Rs 42.45/46 from the previous close of Rs 42.35/36.

''After witnessing selling pressure in the morning, there was heavy demand from banks on behalf of corporates,'' dealers said adding that the Reserve Bank of India did not participate in today's trading.

Cash/spot ended at 0.75-1.00 paise, while tomorrow/spot and cash/tomorrow closed at 0.25-0.50 paise.

The forwards too jumped on higher booking volumes. Monthly premia (in paise) were 5-8 for November, 22-26 for December, 48-52 for January, 78-81 for February, 110-115 for March, 141-146 for April and 173-178 for May. The six-month annualised premia ended at 7.85 per cent.

The rupee closed at Rs 71.26 against the pound, Rs 35.36 for Japanese yen and Rs 25.52 for the Deutsche Mark.

Elsewhere, the RBI fixed the reference rate at Rs 42.37 per US dollar against the previous fix of Rs 42.33.

In international markets, the dollar was lower against the yen as investors and traders awaited the outcome of a Federal Reserve policy-making meeting later in the day. The dollar bought 121.28 yen at mid-afternoon, down 0.86 yen from late Monday in Tokyo but above its late New York rate of 120.07 yen overnight.

UNI

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