Oil Firms To Keep Rupee Weak

The spot rupee is likely to weaken during the week owing to heavy dollar demand from oil companies and lower foreign institutional supplies. Dealers said the expected range for the rupee against the greenback will be 47.95 to 47.15.

A forex dealer with a private bank said, "The rupee should be very volatile in the coming week as there will be huge demand from oil importers. Moreover, foreign institutional inflow which has come down in recent times is expected to go down further. Both these factors may push down the currency below its all time low of 47.10."

He also said that rating agency Fitch has mentioned the possibility of foreign inflows coming down.

Dealers, however, expect the Reserve Bank of India to intervene through state run banks to stem any drastic fall in the rupee.

A dealer with a private sector bank said, "As from the behaviour of the central bank, it is evident that it is not in favour of sharp fall as it can trigger speculation. Hence, the fall in rupee will be gradual rather than sharp."

A dealer with a foreign bank said, "Even in recent times, nationalised banks have moved in the same way.".

The dealer also said that, even on real effective exchange basis, the rupee is overvalued by slightly over 2 per cent, and hence is poised to weaken a bit.

Forward premium will track the rupee's movements and is expected to move up as well. A senior dealer said, " the call money market during will be bit higher. Moreover, the rupee will go down as well. Both of these will push up the forward rates by at least 10 basis points during the week."

Dealers said the six-month forward premium will be in the range of 4.98 per cent to 5.05 per cent in the coming week.