Bank Short Covering Pares Rupee; Premiums Up

The spot rupee ended lower by 4.5 paise today at 47.1650 after the short coverings by banks pushed the rupee lower in the last hour of trading as against Tuesday's close of 47.12. And the premiums closed higher as against Tuesday' close.

The spot rupee opened at 47.11 and remained in a narrow-range through the day. It fell to an intra-day low of 47.1650/17 in the last hour of trading.

A dealer with a new private sector bank said, "Banks went short on their dollar positions and rushed in to buy the greenback once the rupee breached the 47.13-14 levels. This increased the buying pressure, thus pushing the rupee lower."

The demand during the day was regular with some corporates purchasing the greenback. "The supply side continued to be scarce and as buying pressure increased the rupee fell further. The rupee should see some demand tomorrow as well," said another dealer with a private sector bank.

The rupee should keep a range of 47.14 to 47.20 tomorrow. "In the morning itself, the spot rupee should open low at 47.1650/18 and banks are likely to pull it even lower to breach an all-time low of 47.21, which it touched on July 3," said a dealer with a foreign bank. "However, it could keep a range of 47.12 to 46.18," he added.

The forward premiums remained range-bound through the day after opening low but closed higher than Tuesday's close.

The six-month annualised premium ended at 4.65 per cent compared with 4.6 per cent on Tuesday, while the one-year annualised premium closed at 4.70 per cent compared with 4.65 per cent on Tuesday.

"Since the overnight inter-bank rates eased to around 7 per cent after firming in recent days on improved supplies, the premiums opened low. But towards the end of the day, the premiums closed higher," said a foreign exchange dealer.

"The near-term forward premiums kept a narrow range of around 4.7 per cent today. Tomorrow the long-term forwards should remain in a narrow range with the call rates below 7 per cent," said a dealer.