Rupee forwards were active, with one-month forwards ending at 150.90/10 per dollar, compared with Tuesday's close of 151.00/20. One-week forwards were quoted around 150.20/30 compared with Tuesday's close of 150.25/35, while spot-next forwards and the spot rupee were hardly traded, dealers said. "We saw some demand in the morning but it has eased. There were some state bank dollar sales too," said a currency dealer who declined to be named.
"The central bank governor's statement makes sense. It is more sensible to allow market players to determine it." The central bank said in a policy document on Tuesday that experience had clearly demonstrated that maintaining "an overvalued exchange rate at the expense of external reserves" is unsustainable.
A smooth market-based exchange rate would prevent highly disruptive adjustments after periods of stable rates artificially maintained by continuous central bank intervention. "It is time to stop this pattern and commence building up of external reserves through sustainable foreign exchange inflows," the governor said, quoting from the document. The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, dealers said.