Psbs $ Buying Keeps Spot In Thin Range, Forwards Fall

Forward premiums crashed today as the government paper yields continued to decline for the second consecutive day. The spot rupee, however, was traded in a thin range of 48.97 to 48.9850 against the dollar today amid dollar buying by the public sector banks.

The six-month annualised premium closed at six per cent today as against yesterday's closing of 6.17 per cent. The one-year premium went down by the 18 basis points to close at 5.62 basis points from its previous close of 5.80 per cent. Forex dealers said that apart from the fall in government security yields, soft call rates and easing of the border situation also spurred the softening in rates.

In the spot market, the Indian currency opened at 48.98/9850 against the greenback. There was moderate supply of dollars from the foreign and the private sector banks and the rupee went up to 48.9700/9750. However, at this level, the currency faced some resistance as the state-run banks started buying dollars. It closed at 48.9700/9800.

A dealer with a foreign bank said: "As uncertainty over war receded, some inflow of dollars came today. However, the buying by the public sector banks kept the spot rupee rock steady against the greenback."

Forward premium rates will possibly ease further as the downward trend in the government security market is likely to continue. Dealers expect the six-month annualised premium to rule in the range of 5.90 per cent to 6 per cent. The one-year premium is expected to be in a range of 5.55 per cent to 5.65 per cent. The rupee is expected to remain in the tight range of 48.95 to 49 against the greenback during the day. The treasury head of a private sector bank said: "As from today's behaviour, it seems that 48.95 to 49.00 is the range preferred by the Reserve Bank of India. Hence, we expect the currency to trade in that band only."