Rupee Seen In Narrow Range

The spot rupee is likely to hover around 46.91-47.01 against the greenback this week. The six-month premium is expected to stay in the 4.90-5 per cent range on the back of soft and stable call money market.

"The spot rupee should remain in a narrow range during the week. The import demand has been coming down in recent months, and so we do not expect any pressure on the currency. We feel that even the demand for dollars because of oil imports will remain easy during the coming week," a dealer said.

"However, foreign institutional inflows, which have been very high in April, have shown signs of decline. We expect some export remittances in the coming week, but it may not help the local currency to strengthen much," he said.

According to a dealer with a foreign bank, nationalised banks had been buying dollars whenever it touched 46.90 and selling it when it hit the 47 level. If they continue to do so, the rupee will remain in the 46.90-47 band, he said.

A section of the dealers feel that the currency may dip marginally against the greenback over the next fortnight. A dealer with a new private sector bank said, "The dollar's recent gains against the yen and the euro have made the rupee dearer on real effective exchange rate (REER) basis and hence a marginal fall is on the cards."

As on the REER basis, the rupee is overvalued by slightly over two per cent, and hence is poised to weaken a bit. But the Reserve Bank of India may intervene through the nationalised banks to check a sharp fall.

Forward premiums will track movements in the call market and is likely to remain stable.

"The call money market during the coming week is likely to remain stable on the back of an easy liquidity condition created through coupon payments and redemption of the government securities. Hence we expect the forward premiums, at least at the short end, to remain stable as well," a senior dealer said.