Greenbacks Flow Buoys Spot Re, Forwards Biddish

Good dollar supplies by Indian exporters in the foreign exchange market saw the rupee strengthen today and close at Rs 47.86/87 levels to a dollar against the previous close of Rs 47.88/90. The one-year forward premium was biddish and inched up by 20 basis points to 6.37 per cent.

"The market, which opened at Rs 47.87/89 firmed up to Rs 47.85 on dollar supplies by exporters, was relatively quiet in the absence of any negative factors," a dealer with a private sector bank said.

The rupee touched an intra-day low of Rs 47.92 to a dollar. The exporters are bringing in their proceeds as they perceive that the rupee may not fall below the current levels, he added.

The Reserve Bank of India's (RBI) directive asking banks to bring down the interest rate on export credit by 100 basis points, lifting of sanctions by the US and soft crude oil prices had a salutary effect on the Indian currency to some extent.

"However, uncertainty in regard to developments in Afghanistan persist. Forward premiums should be biddish as there is expectation of the Federal Reserve effecting a 25 basis points rate cut on October 2," said another dealer.

The Indian rupee, in the aftermath of the terrorist attacks in the US on September 11, over the last fortnight had plunged to a record intra-day low of Rs 48.43 on September 17. It notched up another record when it closed at an alltime low of Rs 48.01/03 on September 21. The Indian currency has recovered substantially since then.

The rupee is expected to firm up to Rs 47.80 levels on the back of comfortable supplies while forward premiums should remain biddish.