Black Money: Will you pay more at forex counter?

Mumbai: The mood in the currency dealing room was quite unusual on Wednesday, with getting live exchange rate quotes from banks a problem as routine banking transactions had a forced holiday.

Currency brokers struggled to serve their corporate clients on the day after the government decided to withdraw Rs 500 and Rs 1000 currency notes in its fight against black money. Adding to the nervousness in the market was the unexpected victory of republican Donald Trump in the US presidential election.

“This was not a business-as-usual day trading as corporates were not getting regular deals from banks in the early trades as treasury operations were mostly affected due to non-operational (bank) branches,” said Keta Kurkute, vice president, forex risk advisory, at consultancy Mecklai Financial. “The rupee exchange rate was quite volatile with the US election outcome helping the local unit to recoup early losses.”

The cash market was shut as banks were shut for normal branch operations. Corporate clients from Tirupur, Bengaluru and Delhi were declined any live exchange rate quote at which they could exchange local currencies against the greenback or others, dealers said.


The cash market is also used for purposes like remittances and exchanging currencies for foreign travel. Most foreign exchange offices in Mumbai didn’t operate on Wednesday. They are expected to open on Thursday.

There are also some who were looking to profit from the situation.

The owner of a forex outlet in a western suburbs of Mumbai said he would be willing to take cash, even Rs 500 and Rs 1000 denominations, but on a higher commission when it starts operations.

“I have got a lot of calls asking for the same (cash) transaction. I will prefer Rs 100 notes, but in case you have Rs 500, or Rs 1,000 notes as well, I can take that but the price will be different and commission will be higher,” the person said on the condition of anonymity.

According to Navin Raghuvanshi, a currency trader at DCB Bank, people may have to pay an 8-9 paise (0.15-0.20%) premium on Thursday when the market opens if they rush to exchange currencies with exiting notes. This means, you will receive 0.15-0.20% less for every bulk amount exchanged.

On Wednesday, the rupee has seen a topsy-turvy trading, swayed by uncertainties emanating from the US election outcome and the government’s black money measures.

The rupee initially lost 0.28% to the dollar but recouped the losses after Trump was elected to be the 45th president of the US. The local currency closed at 66.44 to a dollar versus 66.62 a day earlier.

“Donald Trump’s victory added confidence to currency market as he is known for his anti-China stance,” said Raghuvanshi, a currency trader at DCB Bank.