Rupee Likely In 47.12-15 Band

The spot rupee should keep a tight range this week on the back of waning interest in the market. Premiums, while tracking the spot rupee and call money rates, will also look for indications of a rate cut by the US Federal Reserve.

"On Monday, the spot rupee should keep a range of 47.12 and 47.15 against the US dollar, after opening a little low. The market could also see some bunched-up demand accumulated over the weekend," said a dealer with a new private sector bank. "The bunching up of demand could lead to the rupee keeping a 4 to 5 paise range on Monday," he added.

"The buying interest in the last few weeks has been minimal and the trend is expected to continue during this week also. There is no speculation in the market, with little demand from regular exporters and enough supplies," said a foreign exchange dealer. "But, the Reserve Bank of India (RBI) would not want the rupee to appreciate too much; therefore, even for this week, the 47.10 level looks like a support level," he continued.

On Friday, the spot rupee opened at 47.10/11. It continued to keep a narrow range of 47.10 to 47.12 during the day. The local currency saw good support at 47.10 levels and some deals also got done at 47.0975 levels. The RBI's reference rate for the dollar on Friday was Rs 47.10.

The premiums should continue to track overnight call rates -- which are currently quite stable, indicating good liquidity conditions -- and the spot rupee, which is also expected to remain stable in this week.

On Friday the 6 months (annualised) premium ended at 4.75 per cent while the one year (annualised) ended at 4.80 per cent.

"There is an Federal Open Market Committee meeting this month, which is expected to cut the US Fed rate even further. So the next two weeks should see premiums factoring in this possible cut," said the dealer with a new private sector bank.

"With all factors positive, the market has set its direction, downwards. There is no political tension and call money rates and the spot rupee are stable. Premiums should continue to remain soft this week as well," said a dealer with a foreign bank. "The 6 months (annualised) premium should keep a broad range of 4.65 per cent to 4.85 per cent," he added.