Rupee Strengthens Against $, Forwards Dip

Export proceeds have helped the rupee to strengthen against the dollar by 5 paise today to close at 48.24/25, while forward premiums fell by 7-8 basis points across all maturities.

The rupee opened at 48.30/31 and fell a bit in early trades to touch the day's low of 48.3100/3150, but closed the day higher at 48.24/25.

A dealer with a private sector bank: "There were huge supplies from the exporters and no demand from the importers. This helped the rupee to strengthen." Dealers said the banks of all categories were selling dollars.

Forward premiums fell once again today after a mild rise on Thursday. The 6-month annualised premium closed at 5.99 per cent compared with Thursday's closing of 6.07 per cent, while the one-year premium dipped to 5.80 per cent compared with Thursday's closing of 5.92 per cent.

A dealer with a foreign bank said: "There rise in the premiums was due to two reasons: the decline in the interest rates on the government securities and the slight increase in the US interest rates." Forward premiums depend on the US-Indian interest rate differential.

Rupee is likely to remain in the range of 48.20 to 48.30 against dollar during the coming week. A forex dealer with a new private sector bank said: "We expect dollar inflow through exports and the foreign portfolio investment. However, the public sector banks may mop up dollars to stem the appreciation of the rupee."

Forward premiums are expected to remain range-bound with a downward bias as the yields on government securities are likely to go down further. According to the market players, 6-month annualised premium should be in between 5.95 per cent and 6.15 per cent, while the 1-year premium is expected to move in the 5.80-5.90 per cent band.