$ Remittances Shore Up Rupee

The spot rupee strengthened by more than 4 paise today to close at 47.87/88 on the back of supply of dollars through export and remittances. Forward eased on the back of steadiness the US interest rates.

The currency opened slightly weaker at 47.92/93 against the greenback compared to yesterday's closing of 47.9150/9175. The rupee, however, strengthened during the day to close below the 47.90 mark.

A dealer with a foreign bank said: "There was good supply on account of export proceeds, while demand from importers was very low. This caused the Indian unit to gain strength." Dealers said that there was rumour in the market that a large corporate house brought $200 million as a part of its export proceeds.

The treasury head of a private sector bank said: "During the week thus far there has been a good supply of dollars. However, it was the buying of dollars by public banks that prevented the rupee to strengthen considerably. Today, even public banks were selling dollars which caused the rupee to go up against dollar."

In the forward market, premiums fell sharply. The six-month premium closed at 6.17 per cent against yesterday's closing of 6.28 per. One-year premium was down to 5.85 per cent from yesterday's closing of 6.01 per cent.

A dealer with a private bank said: "There was a feeling in the market that the US interest rates are already very low and the chance of a further dip is limited. This was the reason why the premiums fell sharply today."

Rupee is likely to remain stable with an upward bias. Dealers said that there will be further supply of dollars through export proceeds, but dollar buying by the Reserve Bank of India through public banks may curb the rupee rise.

A senior forex dealer said: "The RBI may not like the rupee to go up sharply against the dollar and hence can mop up dollars from the market."

Forward premiums is expected to remain steady as the money market interest rates are likely to go up because of auction of government paper through open market window.