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The absolute lack of demand for the greenback from corporates, and muted activity on the part of the central bank in mopping up the dollar liquidity led to the spurt in the domestic currency today, said currency dealers.

MUMBAI, May 20

HEAVY export dollar receivables flooding the market led to the Indian rupee vaulting 9 paise to close the day at 46.90/905 against the dollar in the local currency markets, while the dollar forward premia fell by about 40 basis points.

The rupee opened unchanged from Monday's close, at 46.99/47, which was the intra-day low, with the closing rate being the intra-day high for the day.

The six months forward closed at 0.35 down from yesterday's close of 0.73 per cent and the one-year closed at 0.38 per cent (0.79 per cent) on the back of exporters and importers all punting on the appreciating rupee.

On Monday, the rupee had gained over 14 paise against the dollar while forward premia fell 25-50 basis points.

While the dollar was seen mostly steady against all international majors, the rupee appreciated on the back of heavy dollar supplies. "Most of the inflows that were seen in the market today were from exporters bringing in their receivables rather than from NRI remittances," said a forex dealer in a private-sector bank.

The absolute lack of demand for the greenback from corporates, and muted activity on the part of the central bank in mopping up the dollar liquidity led to the spurt in the domestic currency today, said currency dealers.

"The appreciation in the rupee is expected to continue but the current pace — with daily jumps of 10-15 paise — is not likely to sustain," said Mr P. Mukherjee, Senior Vice-President, Treasury, UTI Bank.

Though exporters have been hedging their positions in the dollar forward market, there are several small players who are being hit by the continuing appreciation of the rupee.

Said Mr Ramu S. Deora, former President, Federation of Indian Exporters Organisation: "Around 40 per cent of Indian exports are from the small scale industry, with receivables varying from Rs 1 lakh to a maximum of Rs 5 crore. These small players are being hit by the current appreciation. They do not have the foresight, vision, expertise or manpower to hedge their exchange rate positions." On the other hand, large corporates with exposures of over Rs 50 crore are reaping gains every day, with most of their exposures oversold, said Mr Deora.

"Overall, the net impact on the international competitiveness of Indian exports will certainly be negative, since the currencies of neighbouring countries like Pakistan and Sri Lanka have not appreciated to the extent that the Indian rupee has," said Mr Kishor Tanna, Managing Director, Jammnadas Madhavhji International Ltd, a large commodities trader with annual exports of over Rs 100 crore. "These countries stand to score over us in the international markets especially in commodities like tea, rice and spices."

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