Easy Liquidity To Buoy Spot, Stabilise Premiums

The spot rupee is likely to strengthen against the dollar during the week on the back of good dollar supply through remittances from abroad. Dealers said that the Indian currency is likely to be in the 47.90-48 range during the week. Forward premiums will remain stable with a downward bias because of easy liquidity in the market.

A dealer with a private sector bank said, "There will be good supply on account of remittances from abroad. Moreover, we are not expecting demand pressure from the importer side. Hence, we are expecting the rupee to strengthen during the week." He pointed out that the Indian currency had moved up against the dollar in the last couple of days confirming the above trend.

The forex head of a private sector bank, however, expressed concern that the public sector bank may prevent the Indian currency to go up substantially against the greenback. He said, "It all depends upon what the apex bank feels about the correct level of rupee. If they feel that it is overvalued, they may mop up dollars from the market through the state-run banks. In that case, the rupee will remain stable around the current levels only."

The spot on Thursday closed higher at Rs 47.9450/9500 to a dollar against the previous close of Rs 47.9825/9875 on Wednesday.

Forward premiums are likely to remain stable with slight downward bias. The treasury head of a new private sector bank said, "Interest rate has been falling both in the US and India. On the back of these, the premiums should remain stable, but as the pace of fall is slightly faster in India, premiums are likely to go down a bit." According to dealers, the six-month premium is likely to be around 6-6.25 per cent, while the one-year premium is expected to be in a range of 5.85-6 per cent during the week.

Forward premiums continued slipping on Thursday on the back of easy money market condition. The six-month premium dropped to 6.15 per cent compared with Wednesday's close of 6.19 per cent. The one-year premium fell by three basis points to 5.82 per cent from previous day's closing of 5.85 per cent.