Bank Supplies Avert Rupee Slide, Forwards Rise

The rupee closed at 46.95 after touching the 47-mark in some of the morning deals. Dealers said that the month-end demand and holiday in United States pushed down the local currency against the greenback but it came back to close firmer due to supply form the state-run banks. Forward premiums, however, ended a bit higher despite the easy call rates.

A dealer with a foreign bank said, "The demand was high and the supply was not there. But, it seems that the state-run banks are not comfortable with the rupee crossing the 47-mark and thus they supplied huge amount of dollars to strengthen the currency."

Forex dealers said that there was rumour that a public sector bank is likely to make a large payment overseas kept the sentiment down in the morning.

Forward premiums, however, rose a bit after dipping in the last couple of days. The six-month premium ended at an annualised 4.96 per cent compared with Monday's close of 4.92 per cent. The premium, however, touched the intra-day high of 4.98 per cent.

A dealer with a private sector bank said, "Dealers actually expected call rates to drop further, but it continued to remain in the same range which pushed forward premiums a bit higher."

Rupee, however, is likely to remain in around 46.95-47 against the greenback. The chief dealer of a private sector bank explained, "Two opposing factors are driving the market sentiment. Firstly, as many of the research reports have mentioned that rupee is still overvalued against the dollar and hence is poised to fall. On the other hand, market is awaiting inward remittances from Satyam Computer Services which recently raised $161.8 million through an issue of American Depositary Shares (ADS) and inflows from telecommunications group Bharti Enterprises which has received foreign equity investment commitments of $460 million." These two factors had kept the rupee range-bound in the last couple of days, he said.

Forward premiums are likely to remain range-bound on the back of easy call rates. Dealers said that the expected range for the six-month premium will be around 4.92-4.97 per cent.