Premiums Hit The Soft Patch, Spot Narrowly Ensconced

Spot rupee remained in a tight band of of 47.96-48.0025 against yesterday's range of 47.98/99-48.04/05. Forward premiums eased today as call rates came down.

The spot rupee opened around 47.97/98 in the morning and strengthened to touch an intra-day high of 47.96/97. The Indian currency, however, weakened later to close in the 48.00-48.0025 range.

A dealer with a private bank said, "Trading was extremely dull in the forex market. There was no pressure from the importers and not much supply coming in from the exporters. The rupee weakened during the later part of the day as the public sector banks bought dollars from the market."

Another dealer said, "There are two possible reasons for the state-run banks buying dollars today. They have offloaded some of their dollar position after the September 11 crisis and they may be trying to rebuild that position. Moreover, they might be acting to protect the exporters' interest."

Forward premiums softened today following call rates. The 6-month premium closed at 6.32 per cent as against yesterday's closing of 6.52 per cent and the one-year premium closed at 5.95 per cent against Friday's closing of 6.18 per cent.

A dealer said, "Premiums went up as call rates rose high yesterday. But today as overnight rates came down so the premiums softened."

Rupee is likely to remain stable and be traded in the 47.95-48.05 range tomorrow amidst supplies coming from the exporters and little pressure from the importers.

Said a dealer with a private sector bank, "There has been no movement in the forex market nowadays and the situation will continue to be so as we do not expect any major supply or demand of dollars tomorrow."

Forward premiums are likely to go down tomorrow as call rates will be slightly easier. Dealers are expecting the 6-month premium to be traded in a 6.20-6.30 per cent range, while the one-year premium should be in a range of 5.85-5.95 per cent.