Rupee shines against dollar

It had to be a good day for the rupee right from the word go, because the dollar has had an extremely weak day globally. It is weak against all majors practically against the Yen, Euro and the pound particularly. Early morning it was a no-brainer to expect the dollar to take quite a badgering and the woes of the dollar-rupee was compounded by the fairly decent performance of the Indian equity markets especially in the early morning session. And whatever the cause of the equity markets, the amount of dollars coming into the system is not funny. It is almost as though the FIIs are marching into the country like a tidal wave.

And the bigger concern for the dollar has been the manner in which Indian companies especially exporters have been selling. The forward dollar crashed so sharply over the last three weeks which was something around Rs 1.50 or Rs 1.60 about 3 weeks ago whereas yesterday it had crashed all the way to Rs 0.45.

So when you are losing Re 1 in just three weeks, people were just coming in and selling dollars at every spike. So it was really dollar selling all the way but there was this one bastion of support coming from RBI. Solid support was seen coming from PSU banks, buying dollars. Some market estimates say that RBI could have bought something like USD 1 billion today. That was the kind of solid support they were giving the dollar.

Money markets had a huge ride in early morning trades on Monday. So it was profit-taking time today. Also, as you get closer to the credit policy, which is due next Tuesday, a week from now, people become wary and want to book their gains and that's what you saw. But there can't be too sharp a fall either for the bond markets because there is so much of cash in the system and if theRBI has indeed bought USD 1 billion, it has put in Rs 4000 crore into the system. With the call giving like a 0.25% and even less, banks have to push their money somewhere. So even if T-bills give you 5% and 6% you will see them coming in and buy. You can't see bonds falling for a very long time.