"Moral suasion has made it difficult for us to trade and liquidity has dried up," one dealer said.
Currency dealers said the Central Bank last Friday had engaged dealing rooms of a few banks over exchange rate movements. "The Central Bank let them have it," one dealer said, but we could not verify this.
"Apart from a state bank trading at Rs. 132.90 to a dollar, there was no spot market activity. However, the forward exchange market saw the rupee settle at Rs. 133.60/134.00 against the greenback," a currency dealer said.
"Moral suasion is now the prime exchange rate policy tool," another dealer said.
The Central Bank and Treasury have both said the rupee would settle at around Rs. 125 against the dollar.
As earlier reported in these pages, Treasury Secretary Dr. P. B. Jayasundera has said there was no basis for the rupee to depreciate the way it did over the past few months and that authorities would intervene if necessary to clamp down on speculation.
However, currency dealers say Central Bank imposed net open positions made it difficult to speculate and that this caused even more volatility because banks had to go to the market for their clients’ dollar requirements and conversions.