Psb $ Buys Slash Spot, Forwards Grooved

The spot rupee ended at a new low of 48.7100/ 7150 to the dollar against Friday's close of 48.70/71. Trading in the foreign exchange market was subdued and marked by dollar purchases by public sector banks (PSBs).

The Indian unit opened at 48.70/72 to a dollar. A foreign bank sold greenbacks at 48.71 levels and this cranked up the rupee to 48.69 levels. But the PSBs continued to mop up dollars throughout the session, resulting in the rupee depreciating to close at 48.7100/7150.

With the Reserve Bank of India (RBI) making its intentions known about "buying dollars in a big way" to fortify the forex reserves and the Indian unit still being overvalued by around two per cent on a trade-weighted basis per dollar, forex dealers expect the weak undertone of the rupee to continue.

"The rupee could gradually depreciate to the 49.50 levels by March end. The RBI appears to be not averse to this weakening as it will give our exporters a competitive edge in the global markets. The demand for the greenback is mainly due to the state-run banks, buying ostensibly on behalf of the RBI, and there is very little demand from the corporates," said a dealer with a private sector bank.

"At the current stage the importers would do well to cover their near-term dollar requirements, while the exporters could wait," explained a dealer.

In the forward segment, the one-year premium opened lower at 5.20 per cent against Friday's close of 5.25 per cent due to easy liquidity conditions in the money market. The premium ended the day at 5.14 per cent levels.

The rupee could weaken tomorrow to 48.75 levels to a dollar if the current dollar buying spree of the public sector banks continues. One-year forward premium is likely to dip to 5.10 per cent levels.