Re Slumps To New Low, Premiums Grooved

Continuing its southward journey, the spot rupee fell by 10 paise to close at a new low of 48.51/53 against the US dollar today. Forward premiums remained almost unchanged as compared with yesterday's levels despite the slump in government paper yields.

The rupee opened at 48.43/44 but slipped sharply to touch the day's low of 48.62/63 -- a historic intra-day low. The currency, however, recovered during the later part of the day.

A dealer with a foreign bank said: "There was huge demand from public sector banks initially which pushed down the currency. However, later in the afternoon, these banks supplied dollars to stem the fall in the rupee."

The six-month annualised premium ended the day at 5.70 per cent today as compared with yesterday's closing of 5.69 per cent. The one-year premium was at 5.50 per cent as compared with yesterday's level of 5.49 per cent.

The rupee is likely to hover in the range of 48.45 to 48.55 against the dollar tomorrow. Said a forex dealer with a new private sector bank: "It all depends on how the public sector banks operate tomorrow. But, given that the rupee is overvalued against the greenback, there may be high demand from them even tomorrow."

Forward premiums are expected to remain range-bound with a southward bias as government paper yields are likely to fall. Said a forex dealer with a foreign bank: "The fall in government paper yields will certainly have a downward impact on premiums. But if the rupee fell heavily, it may stem the fall in the premium rates."

Dealers said the six month annualised premium is expected to hover in the range of 5.65 per cent to 5.70 cent while the one-year premium is likely to remain in the range of 5.45 per cent to 5.55 per cent.