Dollar Remittances Buoy Spot, Premiums Steady

The spot rupee strengthened by six paise to close the day at 47.99/9950 following dollar remittances from abroad. Premium remained steady even as money market rates softened further.

The rupee opened at 48.03/04 and touched a low of 48.04/05 during the day. The currency, however, perked up to close just below the 48 mark. Forex dealers said foreign banks were the major suppliers of dollars today.

A dealer with a private bank said: "This was contrary to our expectation. We thought that the rupee will be weaker than 48 because of the month-end demand. However, it seems that the month-end demand is already over, Moreover, there was good supply from the foreign banks. This helped the currency to strengthen a bit."

A dealer with a foreign bank said: "Last week public sector banks bought dollars heavily. This was absent today and this coupled with a better dollar supply helped the rupee to close higher."

Forward premiums remained stable. The six-month premium ended at the Friday's close of 6.20 per cent, while the one-year premium dipped marginally to 5.92 per cent compared with the Friday's closing of 5.95 per cent.

A dealer with a nationalised bank said: "Interest rate in the money market dipped today, but along with that there was a decline in US interest rates as well. This kept the rate differential practically unchanged and, hence, the minimal impact on forward premiums."

The rupee is likely to remain around 47.95 to 48.05 tomorrow. The forex head of a foreign bank said: "There will be remittances from abroad even tomorrow. However, there is possibility that public banks will mop up dollars if the rupee appreciates too much. In any case, the currency will hover around the 48 mark only." Forward premiums are expected remain stable with a downward bias as the money market rate is poised to fall further.