Forwards Ease On Low Gilt Yields, Re Ends Weaker

The spot rupee weakened marginally and ended at 47.98/99 today, compared with yesterday's close of 47.9600/9650, on the back of dollar buying by the public sector banks. In the forwards market, premiums eased further with yields of government securities going down.

The rupee opened at 47.9800/9850 and ended at 47.98/99 after touching the day's low of 48.01/02. It strengthened in some afternoon trades.

A dealer with a foreign bank said, "The rupee remained range-bound even today as it has been for the past two months. It was only the dollar buying by the public sector banks that pushed down the currency a bit. There was no panic on the market."

A dealer with a private sector bank said the inflow of dollars through remittances, which strengthened the rupee during the last couple of days, was not present today. "This also contributed to the fall in the rupee," he added.

Forward premiums continued to decline due to the easiness in the government securities market. The six-month premium dropped to 6.15 per cent compared with yesterday's close of 6.19 per cent.

And the one-year premium fell by 3 basis points to 5.82 per cent from yesterday's close of 5.85 per cent.

A dealer said, "Premiums moved in the same way as it did yesterday. As the yields in the government securities market plunged to new lows and the call money rates closed below the repo rate for the second consecutive day, premiums dipped further."

Another dealer said the continuous decline in the interest rates, sharper fall in yields of government securities and call money rates have kept the forward premiums downward-biased.

The spot rupee should be in the range of 47.95 to 48.05 tomorrow amid low volume of trading. Dealers are expecting supply of dollars through remittances which, they feel, will be countered by buying by the public sector banks.

Forward premiums are likely to remain stable as the rise in government securities prices will be stemmed by the open market auction to be conducted tomorrow.