Rupee Slips On Corporate Demand, Premiums Staid

The spot rupee ended lower by 4 paise to close at 47.01 today on account of good dollar demand from corporates. Forward premiums ended lower compared with its Monday close.

The spot rupee opened at 46.98/47 and remained bid throughout the day. "Consistent corporate demand kept the Indian currency bid and is expected to remain in a narrow range even tomorrow," said a dealer with a foreign bank.

Rumours of a drilling company purchasing greenbacks kept the bids in a narrow 3-4 paise range.

Dealers said most of the demand in the late morning trading session came from corporates but the latter half primarily saw the liquidation of inter-bank positions.

The afternoon session witnessed dollar sales from nationalised banks, particularly from the State Bank of India (SBI), Canara Bank and Bank of Baroda. "We think this selling was done on behalf of the central bank as lower levels in the rupee was not desired," said a dealer with a new private sector bank.

The Reserve Bank of India (RBI)'s reference rate for the dollar was 47.00 against 46.90 on Monday. Tomorrow the spot rupee is expected in the 47-47.05 range, subject to the Federal Open Market Committee (FOMC) meet and expect rate cut alongwith its effect on premiums.

Forward premiums closed marginally lower with lesser activity seen. The benchmark 6-month annualised premium closed the day at 4.98 per cent against 5.03 per cent on Monday. The one-year annualised closed the day at 5.02 per cent against 5.06 per cent on the previous day.

"There wasn't much activity seen on the premiums front with everyone closely watching for the FOMC's rate cut, expected tomorrow evening. The near-terms closed about 2 paise lower while far forwards closed about 4 paise lower. Tomorrow and the day after, premiums are expected to close higher on the back of the rate cut," said a foreign exchange dealer.

"The expectation of a bank rate cut has also strengthened though after the cash reserve ratio (CRR) cut on Saturday, it may get postponed till the month end or even till mid June," said a dealer with a foreign bank. "The FOMC is expected to cut the Fed rate by 50 basis points," he added.