Rupee To Rule Around 35.97 Against Dollar

FOREX Market

The spot rupee is expected to rule in the range of 35.87 to 35.97 in the inter-bank forex market this week on account of steady dollar demand from corporates, including public sector units and oil majors.

The forward premiums are also expected to firm up as importers seek to cover their near term exposures ahead of the Budget. A cross section of banks put the six-month annualised between 6.8 and 8 per cent. Anticipation regarding the level at which the rupee will rule next month after the announcement of the Budget of February 28 have bought the importers into the market quite aggressively. They have been actively picking up spot dollars. However, this has not had an undue impact on the rupee-dollar parity as supply of the greenback has been adequate to meet the demand. However, what could push up the price of the greenback is the presence of the State Bank of India (SBI). Dealers largely expect the SBI to start purchasing the dollar in a big way for oil majors. This could cause the dollar to cross the Rs 36 band.

The Reserve Bank of India (RBI) is also likely to be present in the spot market. Dealers feel that the RBI will pick up dollars and later sell them to the SBI for oil payments.

This strategy would serve as an indirect intervention, helping reduce the upward impact on the price of the dollar that is likely to occur if the SBI enters the market. The forward premiums should climb up as importers come in to cover for February and March. The RBI's market activities last week saw the premiums come down to attractive levels luring importers. As premiums start strengthening, exporters should start receiving balancing the upward pressure on the premiums. Dealers state that while there might be some anxious buying in both the spot and forward segments of the market, the high degree of uncertainty and volatility that prevailed at this time the last year is likely to be absent.