Outlook : Currency

Rupee to rise anew against dollar

The rupee is expected to appreciate further. It is likely to touch a new high of 48.45 against the greenback, and will trade in a range of 48.44-48.54.

According to dealers, the undertone in the market continues to be bullish. However, the Reserve Bank of India is not likely to allow any major volatility in the market and will intervene if there is any pressure on either buying or selling side.

Dealers said there was central bank intervention on last Thursday, when the RBI started selling dollars at 48.54/50 after the currency started depreciating because of corporate interest.

The RBI is likely to go for a smooth appreciation of rupee. It will intervene only if the exports get affected.

Dealers, however, feel that this is not likely to happen in the immediate future. They feel that the central bank is likely to accumulate reserves with no particular target level.

The RBI is not only looking at covering a particular number of months of import cover, but is also seeing the overall debt situation, including that of the private sector, and keeping a contingency reserve.

The market is not seeing any major inflow into the market. However, with the UTI situation getting stabilised, and stock markets likely to start another bull run, there could be more inflows from foreign institutional investors (FII) into the stock market. Also inward remittances from the non-resident Indians (NRIs) are likely to continue as has been the situation during the past few weeks.

Forwards to continue drifting southwards

Importers are staying out of the market as they have been losing money even after buying dollars in the short-term. Meanwhile, exporters will continue to sell their receivables.

The trend in the forwards market has changed back to what it had been before, with the one-year forward premium falling faster than the six-month forward premium. Further, the fall will be more because of the play in the US, Indian interest rates.

The interest rates in the US are likely to go up after six months, while those in India are likely to go down.

While the six-month forward premium is expected to go below the 4 per cent mark, overall, the forward premiums are likely to be in a band of 3.85-4.10 per cent. There is enough liquidity in the market to keep a forwards easy.