Premiums Buck Trend, Edge Up; Spot Surges South

The spot rupee continued its journey downhill and dipped by another 14 paise to close at 48.19/20 today. Forward premiums eased a bit from yesterday's high levels even though the government paper yields hardened marginally.

The Indian currency opened lower at 48.06/07 slipped further to test a new low at the close. Forex dealers said that there was genuine corporate demand and banks across the board including the public sector ones were seen buying dollars.

A dealer with a private sector bank said, "Importers rushed for cover as the uncertainty at the border continues. Moreover, the exporters have also stopped bringing their proceeds once the rupee started weakening. Both these factors together contributed to the fall of the rupee against the dollar."

Forward premiums fell today reversing the trend since the beginning of the week. The six-month premium closed at 6.75 per cent as compared with Wednesday's closing of 6.85 per cent. The one-year premium closed at 6.43 per cent, little changed from the yesterday's closing level. Dealers said that the premiums overreacted in the last couple of days and today's fall was a correction to that.

The spot rupee is likely to remain weak in the 48.10-48.20 range tomorrow. Forward premiums are expected to remain stable with upward bias as the government securities yields are likely to go up further.

According to forex dealers, the six-month premium should be around 6.70-6.80 per cent tomorrow while the one-year premium should hover in the range of 6.40-6.50 per cent.

The treasury head of a private sector bank said, "As long as the border tension is there, the rupee will remain weak against the greenback. But we hope the Reserve Bank of India to intervene tomorrow through the public sector banks if the rupee breaches the 48.20 mark."