Payment Needs See Forwards Up A Wee Bit, Spot Slips

The spot rupee closed at 47.1225 today, marginally down from Monday's close of 47.12 due to lacklustre trading in a 2 paise range. Forward premiums inched up marginally due to some paying pressure.

The spot rupee opened at 47.12, trading in a very narrow range due to very little interest in the market.

"The lack of interest shows in the thin volume of trading. The spot rupee opened at its intra-day low and traded in the 47.12-47.1350 range," said a dealer with a new private sector bank.

"Except for some month-end demand expected by the end of this week, there is no buying interest in the market. The spot rupee should continue in this stable vein till the end of this week," said a dealer with a foreign bank.

Foreign banks were seen selling dollars, which dealers believe could have been on behalf of foreign funds, which have remained net buyers of Indian assets in July despite falling share prices. These sales were enough to meet light demand in the market.

The Reserve Bank of India (RBI)'s reference rate remained unchanged at 47.13. Tomorrow the spot rupee is expected to remain around 47.11-47.14.

Forward premiums closed a shade higher due to expected US Fed rate cut. The 6-month annualised premium ended at 4.80 per cent as against 4.79 per cent earlier while the one-year annualised premium ended the day at 4.75 per cent as against 4.77 per cent from Monday.

"Forward premiums opened biddish but remained rock steady through the day. The sentiment remains dull and the market players will not take the premiums any lower. It could have gone as low as 4.50 per cent but has not gone down this much as there is still an expectancy of a rate cut," said a foreign exchange dealer.

"Premiums not going any lower could also be the result of good paying pressure in the market. The market participants are quite unsure about how the domestic interest rate scenario is going to be while the Libor going down, a US Fed cut is expected," said a dealer with a private sector bank.

Tomorrow premiums should continue to remain range bound on the back of stable overnights.