Rupee Slips On Oil Price Hike Fears, Forwards Rally

The rupee went down against the dollar on the back of concerns over global oil price and domestic political instability. The Indian currency ended at 46.97 as against Friday's close of 46.94 today. Forward premiums rallied tracking the call money market.

A dealer with a private sector bank said, "the Indian currency slipped 4-5 paise in the morning as the players were concerned over the increase in oil prices. However, the state-run banks came to the rescue and supplied dollars at 46.97, thus preventing further fall."

"It seemed these banks were acting on behalf of the Reserve Bank of India (RBI)," he added.

Forex dealers said the rupee may cross the 47.05 mark by the end of the week if the oil prices remain above $30 a barrel.

Global oil prices hovered around the $30-a-barrel mark on Monday after crossing the level for the first time in three months, on Friday on worries over gasoline supplies.

Another dealer with a foreign bank, however, said, "the rupee is overvalued at the moment due to the strengthening of the dollar against other major currencies - euro and yen - and hence is poised to fall." He added that the rupee is overvalued by more than three per cent against the greenback.

Forward premiums, went up tracking the call money rate which remained firm in the region of 8.50 per cent to nine per cent. The six-month (annualised) forward premium went up by 12 basis points to 5.09 per cent from 4.97 per cent on Friday.

The rupee is likely to slip further and may touch the 47 mark. The chief forex dealer of a private sector bank said: "Concern over oil price may push down the currency further. But the nationalised banks will prevent the currency to go beyond the 47 mark." Forward premiums are likely to track the call market and continue to rise.