Low $ Supply Keeps Re Inert, Forwards Slip A Bit

The spot rupee remained steady in the 47.96-47.97 range today amid low level of trading. Forward premiums moved down a bit at the near-end on the back of easy liquidity condition in the money market.

The rupee opened in the 47.96/9650 range and slipped a bit to 47.97. The currency closed in the same range.

A dealer with a private sector bank said, "There was not much dollar buying by public sector banks today, while supplies were also too low. This kept the rupee in a narrow range."

Forward premiums dipped today after a rise yesterday. According to forex dealers, premiums rose too much yesterday and today's movement was a correction to that. The six-month premium closed at 6.38 per cent against yesterday's closing of 6.42 per cent, while the one-year premium ended at 6.25 per cent -- same as yesterday's closing. Premiums went up yesterday on account of a rise in the interest rate in the US.

The rupee is likely to hover around 48 tomorrow. Dealers said that public sector banks will hold the rupee steady even if it tries to go beyond the 47.95-mark.

A dealer with a foreign bank said, "There was not much of supply today and public sector banks were absent from the market. If supply increases tomorrow, they are likely to come back and mop up dollars on behalf of the central bank."

Premiums will remain stable around the current level. The forex head at a private sector bank said, "Premiums depend on the interest rate differential. As interest rates are expected to fall both in US and India, premiums are likely to remain steady."

A section of dealers, however, suspects that the Reserve Bank of India to mop up liquidity through the open market window, which in turn will push up premiums.