Rupee Up, Political Uncertainty Props Forwards

The spot rupee closed up at 47.1350 after a keeping a choppy 3 paise range through the day, while forward premiums ended higher on the back of political uncertainty.

The rupee opened biddish at 47.15 and fell to its day's low of 47.1650. State-run banks were bidding in the morning, pushing the rupee lower. "Most of the demand today was speculation driven and not regular corporate demand," said a dealer with a new private sector bank.

"News about the prime minister offering to resign, pushed banks into some panic buying in a bid to build positions. Banks bought after hearing of this news. But lack of interest prevented the rupee from sustaining these levels and the rupee appreciated," he added.

Buying interest has been less in these last few days as some supplies are expected in the next month. The month-end, traditionally, sees a lot of buying. However, this month, there has not been as much of an outflow," said a dealer with a foreign bank. "The buying sentiment in the market is really low. So we think purchases should pick up in August," he added.

The Reserve Bank of India (RBI)'s reference rate for today is 47.16 as against 47.14 on Monday. Tomorrow, the spot rupee should keep a range of 47.13 to 47.17.

The forward premiums ended higher after remaining biddish through the day. The 6-month (annualised) closed at 4.85 per cent as against 4.80 per cent, while the one-year annualised ended at 4.88 per cent as against 4.84 on Monday.

"The falling of the London interbank rate (Libor) and political uncertainty pushed the premiums higher and they ended higher at close. The Libor is indicative of a possible US Fed rate cut, while political uncertainty along with news about the prime minister's possible resignation caused the spurt in the premiums," said a dealer with a private sector bank.

"Tomorrow, the premiums should continue to track the call rate and should watch for a Fed cut closely. They should continue to remain biddish," said a foreign exchange dealer. The 6-month (annualised) should keep a range of 4.80 per cent and 4.90 per cent.