$ Sales Spree Soothes Spot, Call Tempers Premiums

The spot rupee closed at a new low of 47.99/48.01 today, but it traded in a narrower range of 47.80/81-48.04 against yesterday's trading band of 47.83/84-48.42 as the public sector bank sold dollars heavily. Forward premiums went down as call rates eased and the rupee volatility was stemmed.

The spot opened around 47.80/81 level in the morning and weakened sharply as the corporates continued to cover their position heavily. The Indian currency touched an intra-day low of 48.04. It, however, gained strength later as the public sector bank led by the State Bank of India resorted to heavy selling of the greenback. Forex dealers said that selling was done on behalf of the Reserve Bank of India.

A dealer with a private bank said, "Yesterday the state-run banks came to the market in the afternoon. But today as soon as the rupee breached the 48-mark they started supplying dollars to arrest the fall."

Forward premiums fell sharply today as call rates dipped below the refinance rate of seven per cent. The 6-month premium dipped by 135 basis points to close at 5.8 per cent compared with Friday's closing of 7.15 per cent while the one-year premium went down by 85 basis points to close at six per cent as against yesterday's closing of 6.85 per cent.

A dealer with a nationalised bank explained "Forward premiums move in tandem with call rates and the rupee volatility. Both the condition has improved considerably today and hence the premiums."

The forex market is likely to remain stable tomorrow. The treasury head of a private sector bank said, "There has been concern over the international development, but the RBI is likely to keep the currency around the present level by supplying dollars through the state-run banks."

Forward premiums are also likely to decline further as the dealers are expecting further easing of call rates and a stable forex market tomorrow. The six-month premiums is likely to touch 5.50 per cent and the 12-month premium may touch 5.50 per cent tomorrow.