Dollar Demand To Keep Re Over 48

Month-end demand for dollars will keep the rupee over 48 mark during the week. Dealers said that the currency is likely to be around 48 and 48.07. Forward premiums will remain stable with a downward bias owing a stable call money market.

A dealer with a private bank said, "There will be good supply on account from remittances from abroad. However, month-end demand will keep the currency slightly weak during the week."

"The rupee is now a bit overvalued on the basis of trade weighted real effective exchange rate. With this at the background, we do not expect the Reserve Bank of India (RBI) to supply dollars to the market. Hence the rupee should remain weaker than 48 during the week," said a forex head with a private bank.

A dealer with a foreign bank said, "During the last couple of days, the rupee closed lower than 48 because of importers' demand which will persist during this week as well."

The currency opened around 48.02/03 on Friday and dipped further to close at 48.05/05. The closing was, however, marginally lower than Thursday's close of 48.02/03.

The forward premiums are likely to come down a bit during the week. Said the treasury head of a new private bank, "Premiums will be stable during the week as the interest rates are falling both in the US and India. However, as the fall is bit sharper in India, it will remain downward biased."

According to dealers, the 6-month premium is likely to be in the range of six per cent to 6.10 per cent, while the one-year premium is expected to be in a range of 5.90 per cent and six per cent during the week.

On Friday, the six-month premium closed at 6.20 per cent compared to Thursday's close of 6.22 per cent, while the one-year premium dropped to 5.95 per cent from Thursday's closing of 6.14 per cent.