Rangebound Spot, Forwards Presaged

The forex market may not see much movement during the week. While the spot rupee is likely to hover around the 48 mark amidst low volume of trading, forward premiums will remain stable with a negative bias with money market interest rates going further southward.

According to a dealer with a private sector bank, "the movement in the forex market will continue to be dominated by the public sector banks. For the past one month they have been holding the rupee around the 48 mark, even though there has been modest supply of dollars from exporters. If they continue to do so, the Indian unit will remain around the same level."

Said the forex head of a private sector bank: "It seems that the public sector banks have been working on behalf of the Reserve Bank of India (RBI). The central bank wants the rupee to be at that level to protect exporters' interests."

Last week, there has been a bit of volatility in the forex market because of the holidays, a dealer with a foreign bank said. However, as there will be no holiday this week, the market will remain stable, he added.

The rupee was traded in the range of 47.97/9725 to 48.00/0050 on Thursday. The Indian currency opened in the range of 48.0000/0050 and strengthened during the day on the back of supplies from the exporters and foreign institutional investors.

Forward premiums are likely to dip a bit. The treasury head of a new private sector bank said: "The US interests rates are not likely to fall further, at least in a big way. On the other hand, interest rates across all the markets in India are likely to fall further during the week. This will push down the forward premiums." The 6-month premium is likely to be in the range of 6.25 per cent to 6.45 per cent, while the one-year premium is expected to be in the 6.15 per cent -- 6.30 per cent range.