Carry Cost Shaves 3 Paise Off Spot, Forwards Dip

The spot rupee closed the day 3 paise lower at 46.9950, after remaining biddish for the entire day. Forward premiums also came off by 1-2 paise.

"The rupee opened 1.5 paise lower after adjusting to the change in the spot rupee date from Friday to Monday. After that adjustment, the rupee fell by another 1.5-2 paise to end the day lower," said a dealer with a foreign bank.

The demand was mostly from nationalised banks and a foreign bank. "The nationalised banks were buying at levels of 46.9750/98, but as the rupee got dealt at figure 47, the same nationalised banks were seen offering to sell," said a dealer with a new private sector bank.

"The spot rupee opened weak due to high carry cost and kept a tight range through the day. Some importers were seen booking leading to some demand," said a dealer with a private sector bank.

The rupee remained range bound around 46.97-47. "The figure 47 may be the level where the rupee stays put for some time now as resistance is seen at those levels," he added. Some foreign banks were also covering their positions after going short on Wednesday to take advantage of the weekend carry.

As volumes are expected to remain thin, the spot rupee should not weaken further tomorrow. It should move in the 46.98-47 range with good supplies expected at the 47 level. The Reserve Bank of India's reference rate for the dollar was 47 as against 46.96 of Wednesday.

Forward premiums continued to come off partly due to the announcements about the private placements that eased some nervousness about liquidity.

The six-month annualised premium closed the day at 4.80 per cent unchanged from Wednesday while the one-year annualised closed the day at 4.84 per cent against 4.95 per cent on Wednesday.

"The closing of the open market operation (OMO) window so quickly made the market a little nervous but with Rs 4,000 crore released through the repo, relief came in evidence," said a dealer with a private sector bank.

Tomorrow premiums are expected to soften, though the result of the FOMC meet will come tonight. "If the rates are cut then premiums might go up a little but otherwise there should be a general downward bias," said a foreign exchange dealer.