The RBI’s hard talk to banks seems to have little effect on the falling rupee as it closed at a new low of 44.78/44.81. The rupee was pushed lower by late dollar purchases made by importers and corporates. This was despite steady supply of dollars by SBI and other state-run banks. There was no inter-bank speculation but just panicky corporates. The rupee has already lost 2.5% in the current fiscal which many forex experts attribute to a minor correction. Large purchases made by importers and corporate sector towards the close pushed the rupee down. These corporate were uncertain about the levels of the rupee and therefore they made huge purchases. There were also corporates who had unhedged foreign currency loans buying in forwards, fearing that rupee was going to fall further. SBI came into the market and made dollar sales but that seemed to have little effect.

There were general expectations that exporters will come and sell dollars but due to uncertainties on where the rupee might finally settle, exporters were holding their dollar receivables. The Forward market also came under pressure due to high call rates, a strain on liquidity due to Thursday’s bond auction and fears that the RBI might tighten short-term liquidity to firm the rupee up.

Inter-bank speculation forced the rupee to touch a new low of 44.95 against the US$ before closing the day unchanged from its previous close. The rupee ended at 44.73 to a dollar on Thursday. The rupee opened almost at the level of Wednesday and started moving down because of heavy inter-bank speculation. There was also some demand from the importers. At this point of time, the RBI, which was following inter-bank transactions came down strongly on banks to end the speculation. In a brief, but strong statement to banks, RBI said, "the inter-bank activity this morning, despite the RBI’s reminders, seems to be speculative. The RBI had instructed banks to maintain a square position for the day. If necessary, the RBI will intervene directly. All genuine market participants would do well to take this into account." The RBI instructed banks to unwind all long dollar positions to increase the supply of dollar in the market and not to take any long position for the day. This helped the rupee to recover and close at 44.73.

The falling rupee touched a new low against the USD on Wednesday amid huge demand for dollars by banks and the corporate sector. It closed at 44.73 on Wednesday against its previous close of 44.625/6725. The rupee was just a little short of its all time intra day low of 44.75 against the US$. Some stray deals were even reported at 44.75 level. The rupee opened firm on Wednesday at 44.655/665 but dealers say that heavy purchases made by SBI early in the day pushed up the demand for the dollars, which caused the rupee to fall. This triggered a rush for dollars in the market with other banks also joining the bandwagon. At that point, importers rushed to buy dollars fearing a free fall in the rupee, which caused rupee to fall further. However, some nationalized banks entered the market later in the day and sold dollars, which helped the rupee recover marginally.

Rupee ended the day at 44.665/6725, unchanged from the Monday’s close. It opened at 44.67/68 and there was huge dollar demand from importers immediately, which caused rupee to slide. Dealers said that most of the activity we are seeing in the past few days is purely inter-bank speculation. Banks off-loaded their long positions in dollars, when the rupee touched its intra-day low because there was no demand from exporters at that level. This helped the rupee to recover marginally. The SBI also quoted the rupee back to 44.67/68 level.