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Rupee stable, imports check further gains

The Indian rupee was stable and close d in a firmer range on Monday, steadied by the central bank's monetary measures amid continuing light import demand for dollars, dealers said.

The rupee closed at 44.73/75 per dollar at 2:45 p.m.

It had opened at 44.70/75, sharply firmer than Friday's close at a record low of 45.025/03.

"Underlying demand for dollars is intact, and that is keeping it (the dollar) supported at 44.70 level," a dealer with a foreign bank said.

"But the action has now moved to the forwards too. Many importers are hedging near-term payables."

A large private sector firm was the main dollar buyer, dealers said.

The Reserve Bank of India caught the markets by surprise late on Friday with several monetary tightening measures on Friday, aimed at protecting the rupee which had slipped close to a per cent in two weeks until Friday.

It hiked banks' cash reserve ratio (CRR) by 50 basis points to 8.5 per cent in two stages, and the bank rate by one percentage point to 8.0 per cent.

The central bank also reduced limits available to banks for refinance facilities by 50 per cent.

Foreign funds had been heavy dollar buyers last week, converting their equity sales to dollars. They have so far sold $305 million worth equities in July.

Dealers said besides import paying, the prospect of tighter money market liquidity was keeping dollar premiums bid.

The RBI's measures will absorb nearly Rs 43 billion from the money market in the first stage of measures that take effect at the end of this week.

And on Monday, Rs 50 billion were drained out through the daily repo auction at which the RBI set a cut-off of 8 per cent.

The six-month forward premium was up at an annualised 4.76 per cent compared with Friday's 3.79 per cent.

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