RBI hops between spot, forward for a stable Re  TNN Aug 20,
2008, 03.20am IST  MUMBAI: At a time when demand for dollars is
outstripping supply, the Reserve Bank of India (RBI) is facing a
daunting task. The central bank is juggling between the spot and
forward markets to prevent the rupee from slipping without
drying up its supplies.  By adopting a combination of spot and
forward transaction, the central bank is attempting to smoothen
its forex market operations and avoid volatility or steep
movements in the currency.  When RBI sells dollars in the spot
market to support the rupee, it ends up sucking out rupees.
However, in the forward market, currencies are bought and sold
at a pre-determined rate without taking physical delivery for an
agreed period. The delivery is generally on the date when the
contract matures. This prevents supplies from hitting the spot
market and helps manage the value of the currency as also the
cash condition in the market.  RBI has been tactfully managing
the reserves and exchange