U.S. crisis takes heavy toll on rupee

MUMBAI, SEPT. 14. The rupee's free fall against the U.S. currency gathered further momentum today, hit fresh intra-day historic low of 47.84/86 and ended at yet another lowest-ever close of 47.82/84, pulled down by hectic dollar demand from banks over fears of retaliation by the U.S.

Declining by a whopping 26 paise from the previous record low finish of 47.56/58, the rupee came under pressure from the onset of business after it opened at a new low of 47.55/60, as expected post-U.S. crisis, took a heavy toll of the rupee value, dealers said.

Nervousness continued to grip the inter-bank foreign exchange market due to the uncertainties following the horrific terrorist attack on the U.S.

``A near-panic situation prevailed on the forex spot market on apprehensions over the U.S. developments, and worries about direct retaliation on those responsible for the attack," a dealer said.

The rupee, already reeling under tremendous pressure, came under a fresh heavy onslaught, as banks and nervous operators scrambled to cover short-dollar positions even as supplies dwindled.

A feeble dollar-selling intervention by State-run banks in support of the rupee, probably at the behest of the central bank failed to arrest the slide, bankers said.

Concerns of a slowdown in forex inflows and rising global oil prices, coupled with a fair amount of inter-bank speculative play, seen weighing heavily on the rupee.

``Inward remittances have fallen to a trickle following the closure of New York markets after the terrorist attacks on Tuesday. Inflows from overseas centres have also dropped to a minimal. Demand for dollars far outstripped available supplies," a dealer said.

However, a few currency traders felt despite the negative sentiment, the rupee will not stay volatile for long in a tightly controlled market. Moreover, it is backed by comfortable forex reserves. Record forex reserves of over $45 billion will help the Reserve Bank of India to guard the rupee convertible only on the current account from excessive speculation.The RBI fixed the reference rate at Rs. 47.70 a dollar against Rs. 47.54 yesterday.

In cross currency deals, the rupee slumped against the Euro and the British pound sterling, reflecting both these units' rise against the dollar in overseas trading.

- PTI

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