Rupee Strengthen On Dollar Supply, Forwards Stay High

The rupee continued to remain below the 47 mark against the dollar amidst large dollar supply. Forward premiums, on the back of high call money rates, remained around the same level as on Wednesday.

The rupee opened at 46.98-99 level in the morning against the dollar but strengthened during the day to close at 46.9650 per cent level.

Dealers said there was huge dollar supply form the foreign banks and some of the private sector banks that helped the rupee remain stable.

A dealer with a private sector bank said: "The rupee was slightly weak in the morning due the demand form a state-run banks. However, that did not last for long and the foreign banks were seen off-loading their dollar position as the rupee hit the 46.99 mark. The rupee closed in the range of 46.9650 at the end of the day."

Dealers said public sector banks are seen to oppose the rupee's appreciation. A dealer said, "as the rupee is believed to be overvalued against the dollar, the state-run banks, most probably on instructions from the Reserve Bank of India (RBI), are seen to push down the rupee."

Forward premiums continued to remain high as the call money rates went up further and stayed in the range of 7.25 per cent to 7.60 per cent.

The six-month premium ended at an annualised 5.20 per cent compared with yesterday's closing of 5.18 per cent.

The rupee is likely to remain in the range of 46.95 to 47.05 against the dollar tomorrow. Dealers said though the rupee was seen remaining below the 47 mark for the last couple of days is poised to fall on the real effective exchange rate basis Indian currency is overvalued against the greenback.

Forward premiums are likely to go up further as the call money rates are expected to remain high on the back of further tightening of liquidity.

Dealers are expecting the six-month annualised premium is likely to go up by another five basis points to 5.25 per cent.