Dollar Demand Pares Spot Rupee, Forwards Slip

The rupee slipped marginally to touch 47 per dollar today on the back of heavy demand for greenbacks from state-run banks, while forward premiums eased tracking stable call rates.

The local unit opened weaker in the 46.97-98 range and fell further during the day. A dealer with a foreign bank said, "The demand was mainly from state-run banks which were buying dollars to meet their month-end demand."

Dealers said some private sector banks were also purchasing dollars in the afternoon. However, another dealer said the fall in rupee was checked by dollar sales by a foreign bank in afternoon trades.

A dealer with a private sector bank said part of the demand was from a domestic oil company.

The chief dealer at a private sector bank said, "There was also short-covering by banks to benefit from the weekend positions as the spot date shifts to next month."

Forward premiums eased considerably as call rates continued to remain easy. The six-month forward premium ended at 4.88 per cent compared with Wednesday's closing of 4.94 per cent.

The rupee is likely to remain in the 46.95-47 band tomorrow. Dealers see two factors which are keeping the Indian currency range-bound.

"The rupee is overvalued against the dollar and hence is poised to fall, while on the other hand foreign institutional inflows is still good enough to counter the demand," said a forex dealer with a private sector bank.

Forward premiums are likely to slip further as call rates are likely to remain soft. A dealer said, "Given the liquidity situation, call rates are likely to remain below seven per cent and hence we are expecting the forward premiums to fall further."