Psb $ Demand Arrests Re Rise, Premiums Dip

The spot rupee was traded in a narrow range of 47.1150 and 47.1350 against the dollar today, compared with yesterday's level of 47.1150-47.15. Volumes continued to remain low. Forward premiums came down heavily on the back of comfortable liquidity situation and the Reserve Bank of India's reiteration of a bias towards soft interest rate in its annual report.

The local currency opened in the 47.1250-47.1350 range and strengthened a bit to touch 47.1150. However, it failed to go up further because of a buying spree of public sector banks.

"Many public sector banks bought dollars as the rupee reached the 47.1150 mark," a dealer with a new private sector bank said. Dealers felt the public sector banks were acting on the behalf of the apex bank. The RBI reference rate for the dollar was at 47.13 as against 47.15 yesterday.

Forward premiums went down sharply today. The six-month premium dipped to touch 4.50 per cent, while the one-year premium closed at 4.65 per cent.

According to a dealer with a foreign bank, the liquidity position was reflected in the huge repo bid over Rs 15,000 crore.

Moreover, as the central bank had in the annual report expressed the intention to keep the interest rates soft, forward market rates dipped, he said.

The rupee is likely to remain rangebound in the 47.11-47.14 level tomorrow. "The domestic currency is hoped to move within a narrow band with volumes remaining low," a dealer said. He said the rupee could actually appreciate but for the dollar demand from some of the nationalised banks.

Dealers expect forward premiums to dip further. "Call rates are likely to remain soft and stable around the current level and hence forward premiums too are expected to dip further," the treasury head of a private sector bank said. Dealers expect the six-month premium to touch the 4.45 per cent mark and the one-year premium to slip as low as 4.55 per cent.