Banks Offloading Saves Spot, Premiums Up A Bit

The spot rupee closed the day marginally up at 47.0325, against yesterday's closing bid of 47.0375 due to ample supplies while forward premiums rose marginally to close slightly stronger.

The spot rupee opened the day low at 46.0550, after a two paise correction due to the change in spot date from Friday to Monday. It traded down initially, touching an intra-day low of 47.0650 but recovered later to trade at levels of 47.0250.

"The spot rupee remained biddish due to good continuing demand from the oil corporation that has been purchasing for the last few days. But today as opposed to the last few days, the supplies in the market were good as banks liquidated their long position," said a dealer with a foreign bank.

The demand continued to push the rupee lower but with nearly all nationalised banks selling, the demand was squared off to a good extent.

"That is precisely the reason the rupee closed marginally higher than yesterday," he added.

The Reserve Bank of India (RBI)'s reference rate is 47.05 as against 47.04 on Wednesday. Tomorrow the spot rupee is expected to keep a range of 47-47.05, a range dealers believe the RBI is keen to see the rupee move into.

Forward premiums remained largely steady today with a little upswing due to rising call. Premiums have been steady for the last few days on the back of expectations of a bank rate cut.

The benchmark six-month annualised premium closed at 4.92 per cent against 4.80 per cent on Wednesday while the one-year annualised closed at 4.92 per cent against 4.85 per cent on Wednesday.

"Premiums saw little or no action today as the expectation of a rate cut kept the premiums steady. Since the differential has been widening, for the last few months, rate cuts have been expected, most of which have already been factored into the premium levels," said a dealer with a new private sector bank.

Tomorrow, unless the rate cut is announced, premiums should continue to hold steady. "These levels of premiums are quite low and have not touched these levels in quite a few months. So if the cut comes through, premiums might go up," added a foreign exchange dealer.