Overseas Events To Affect Rupee

The Indian rupee's parity vis-a-vis the dollar in the coming week will depend on a host of factors including whether the US mounts an attack on Afghanistan, the crude oil prices and a rate cut. However, most of the forex dealers expect rupee to rule in the 48.10-49.95 range to a dollar in the coming week even as the Reserve Bank of India (RBI) said it was keeping an eye on the falling rupee amid uncertainties arising from fears of war in Afghanistan.

The benchmark one-year forward premium is expected to stabilise at 6 per cent from the previous 7 per cent levels on the back of overnight inter-bank call rates stabilising at 7.25-7.75 per cent levels.

The Indian currency's southward journey started on September 7, when it stood at 47.20, touched an intra-day low of 48.40 on September 17 and closed at a new low of 48.02 on Friday (September 21), the last trading day of the week. At Friday's close, the Indian currency has fallen 1.8 per cent since the start of the month and 2.8 per cent so far in 2001.

"The overall sentiment in the forex market is negative and depressed. While exporters may hold on to their dollars, the importers will need to take forward cover. The one-year forward premium is expected to stabilise only if call rates hold steady," a forex dealer with a private sector bank said.

Dealers feel that the central bank is expected to intervene by asking the public sector banks to sell greenbacks once the rupee touches 48.20 mark.

Meanwhile, the Reserve Bank deputy governor Y V Reddy allayed fears of a sharp fall in rupee at a seminar in Bangalore on Saturday. He said, "We are monitoring it (the rupee). The global events have come as an external shock. An external shock is unfolding and, therefore, we have to monitor the situation very carefully, particularly in terms of the market and that's what we are doing. All I can assure you is that we are there."