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Rupee dives 17 paise on fear of open war

The rupee fell sharply by 17 paise on sudden dollar buying induced by fears that the Kargil conflict was escalating into a full-scale war between India and Pakistan.

The inter-bank foreign exchange market remained panicky as the major players went on a dollar-buying spree, expecting the situation to worsen.

The rupee opened at 43.14/16, and remained range-bound in the morning's trading. At 1320 IST, the rupee declined to 43.20. Ten minutes later, it was quoting at 43.28. It continued on its downward journey and ended the day at 43.31/34. The previous close was Rs 43.15/17.

"The market reacted negatively to statements by the prime minister that the country was ready for a war, if thrust on it. Reports that the armed forces had been put on high alert to meet this eventuality aided the rupee's fall," said a dealer.

The Reserve Bank of India stayed away from the market. But the State Bank of India was buying heavily on behalf of its clients, said dealers.

Dealers expect the rupee to cross the Rs 43.40 level tomorrow if panic buying continues in the market.

Against other currencies, the rupee ended at 69.29 a pound sterling, 45.02 a Euro and 35.92 a yen. The reference rate fixed by the RBI was Rs 43.18 a dollar, from Rs 43.13 in the previous session.

UNI

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