Rupee Calm After Intra-Day Turbulence, Forwards Ease

Rupee remained little changed against dollar today. The Indian currency closed at the 47.1400/1500 -- the same level as yesterday's closing, after hitting an intra-day low of 47.1725 in the morning.

A dealer with a foreign bank said, "Rupee was traded lower against the greenback due to importer demand including some light buying by an oil firm."

A dealer with a private sector bank also mentioned about the demand from the tourists that brought down the spot against the dollar. The scenario, however, improved later as a large nationalised banks offloaded dollars.

Forward premiums eased as soft rupee rates fuelled receiving interest (buy-sell swaps). The one-month annualised forward came down to 3.80 per cent from 3.92 per cent on Monday, and the six-month premium dipped to 4.46 per cent compared with 4.58 per cent.

The spot rupee, however, is likely to go down further due to the slowing down of foreign fund inflows. Foreign funds bought a net of just $22.1 million of Indian shares and bonds this month till July 6. In June, their net purchases were worth $240.1 million. "We do not see any improvement in inflows either," said a forex dealer.

Foreign fund investments, so far in this fiscal aggregating $2.48 billion, have helped keep the rupee relatively stable against the dollar in sharp contrast to major currencies such as the euro and the yen losing sheen against the dollar. But as the inflows are getting fatigued because the rupee is estimated to be overvalued by four per cent on a trade-weighted basis, the Indian currency is due for a fall.

Forward premiums are likely to ease further tomorrow as call rates are expected to go down further.

A dealer with a nationalised bank said, "Ample liquidity in the money market and the lower demand before the closing of the reporting fortnight will keep the overnight rates soft, we expect the premiums to go down as well."