Overseas borrowings to the rescue

OUTLOOK: Currency

While inflows from foreign institutional investors have tapered, another dollar tap remains open "" corporates that have raised money abroad through American depositary receipts are bringing in the proceeds. This has been the major reason behind the strength of the rupee.

The forex market is expected to remain rangebound this week. The dollar could gain against major global currencies. This is because data on Eurozone have failed to lift the euro.

The recovery of the dollar therefore means the rupee might depreciate to align with the euro and the pound.

In this backdrop, dealers expect the spot rupee to rule in the range of 43.40-65 to a dollar.

And if oil prices go up further, they may depreciate the rupee because demand for dollars from importers will go up.

Forwards northward

Forward premiums are likely to move up with oil prices. This is because oil companies will rush to cover their import obligations before crude shoots up.

The banning of Mifor swaps in the foreign exchange market has led to unwinding of small positions.

This has resulted in ample dollar supplies because banks are cutting down their positions wherein they had booked forward dollars, said a foreign exchange dealer.

Recap: The spot rupee remained rangebound last week while premiums on the forward dollars fell as some banks who had positions in Mifor unwinded, releasing dollars into the system.