$ Flows May Keep Re Up, Forwards Seen Inert

The rupee is likely to harden this week on the back of good dollar supplies on account of remittances from abroad, export proceeds and foreign direct investment.

Dealers said the rupee will hover around the 47.75-47.85 range during the week, while forward premiums may remain stable with a northward bias as gilt yields are likely to remain firm.

A dealer with a private sector bank said, "Dollar supplies have been good over the last one month and will continue to remain so during the week. This will help the rupee to go up against the greenback."

According to a forex head at a private sector bank, public sector banks may play the spoilsport. He said: "The RBI may not let the rupee to appreciate too much as it will hamper exporters' interest. The central bank may intervene through public sector banks and stem the rupee's rise."

The rupee ended the day at a 12-week high of 47.82/83 on Friday. The currency had jumped by nine paise last week. On Friday the rupee opened at 47.86/87 and increased to touch an intra-day high of 47.81/82. It closed slightly lower at 47.82/83.

Forward premiums are likely to go up as money market rates are expected to move northward. A treasury head at a new private sector bank said, "Premiums reflect the interest rate differential in India and the US. As government security yields are likely to go up further, premiums are expected to follow the same trend."

According to dealers, the six-month premium is likely to be in the 6.10-6.22 per cent band, while the one-year premium is expected to be in the 5.95-6.10 per cent band.

On Friday, the six-month premium closed at 6.20 per cent compared with Thursday's closing of 6.22 per cent, while the one-year premium dropped to 5.95 per cent from 6.14 per cent on Thursday.