Rupee Seen Range-Bound, Forwards Easy

FOREX MARKET

The rupee is expected to rule between 35.83 and 35.93 against the dollar this week amid subdued trading activity. The forward premiums are expected to remain steady.

The six-month annualised rate may quote in the region of 6.8 per cent to 7.75 per cent.

Unless the State Bank of India, or another major bank enters the market, the rupee-dollar parity is not likely to change, said a dealer with a private bank.

The spot market was listless for most of last week causing the rupee to appreciate to 35.8475/8525 on Friday, as against 35.85/87 on Monday.

On Wednesday and Friday, the Reserve Bank of India (RBI) picked up greenbacks at 35.85 to keep the rupee from appreciating unduly.

The apex bank may continue to intervene this week too, keeping the rupee in the 35.84-35.85 range.

There are other reasons why the rupee may not dip below 35.84.

One of them would be the probability that exporters may book the forward dollar for the near-term, if the spot rate is ruling low. If this happens, there could be some upward pressure on the Indian currency.

The forward segment experienced bouts of volatility last week with the premiums first rising and then declining.

They finally levelled off, hovering around 7.5 per cent, as paying and receiving pressure varied. A similar scenario may emerge this week.

A lower premium will encourage banks to swap their FCNR(B) funds. As a result, the paying pressure will drive up the rates.

This, in turn, could induce exporters to receive the premium by trading on their expected export remittances, which could once again pull down the premiums. All in all, banks expect the forex markets to witness only routine trading activity in both the spot and forward sections.