Premiums Up On Fed Rate Cut Talks

The rupee ended barely changed at 47.8250/83 today on the back of dollar buyings by a large state-run bank. The six-month forward premium was up two paise due to expectations that the US Federal Reserve may cut interest rates on Wednesday.

Heavy weekend inward dollar supplies and exporter remittances were mopped up by large public sector banks.

The rupee ruled in a narrow 47.8025-47.8275 range and ended at 47.8250/83, almost unchanged from Friday's close of 47.82/83. The rupee, which has been firming up steadily for almost two weeks, is currently at a 12-week high.

Dollar forwards were mixed, as conflicting signals from the US and strained domestic liquidity gave rise to some paying (sell-buy swaps).

Dealers said the fixing of Monday's London inter-bank offered rate at around 10 basis points lower than last week's level of around 2.60 per cent and uncertainty over the interest rate after the Federal Reserve's policy-setting committee meeting on Wednesday kept the market jittery.

Also, the slight upward blip in call rates following heavy outflows into bond sales last week spurred forwards higher.

The one-month forward premium ended down six basis points at 6.30 per cent, while the one-year forward ended five basis points up at 6.01 percent.

The rupee is expected to be range-bound in the 47.80-47.82 band. The movement of forward premiums will depend on the rate cut likely to be effected by the US Federal Reserve.