$ Pull By Importers Keeps Re Weak, Premium Dips

The spot rupee closed below 48 mark for the second consecutive day on the back of strong dollar demand from importers. Premium dipped further today on the back of easy liquidity condition in the money market.

The currency opened around 48.02/03 and dipped further to close at 48.05/05. The closing was, however, marginally lower than yesterday's close of 48.02/03.

A dealer with a foreign bank: "There was demand for dollar across all the banks. On the other hand, there was not much supply either from the exporters or from foreign institutional investors. This weakened the currency a bit." Dealers, however, said that there was no panic in the market even though the currency went down against the greenback for the second consecutive day.

A treasury head with a private bank said, "Though the rupee weakened further today, there was not much volatility in the market. This kept the players complacent." The Reserve Bank of India's (RBI's) reference rate for rupee was 48.04 as against yesterday's level of 48.02.

Forward premiums continued its southward journey with money market liquidity remaining comfortable. The six-month premium closed at 6.20 per cent compared to yesterday's close of 6.22 per cent, while the one-year premium dipped heavily to 5.95 per cent from yesterday's closing of 6.14 per cent.

The forex head of a foreign bank said: "Call rates continued to remain easy and government security yields fell a bit too. With the outlook for interest rates going down further, premiums fell today." He mentioned that though interest rates are falling in the US as well, the dip is sharper in India and that is why the premiums are negatively biased.

The rupee should be in a range of 47.95 to 48.05 in the coming week amid low level of trading. Forex dealers said that they are expecting good remittances from abroad which will keep the currency steady. Forward premiums are likely to go down further with the money market interest rates falling.