Rupee Weakens On $ Buying By State-Run Banks

The spot rupee today weakened by four paise against the US dollar to close at 48.66/67 on the back of dollar buying by state-run banks. Forward premiums, however, dipped a bit despite a rise in government paper yields.

The rupee opened at 48.63/64 levels. It, however, strengthened to touch a high of 48.6000/6050 as a European bank supplied dollars. However, state-run banks started mopping up the greenback at 48.6400/6450 levels. This caused the rupee to slip to settle at 48.66/67 levels.

Said a dealer with a new private sector bank: "There were ample supplies of dollars. However, it seems the Reserve Bank did not want rupee to go over 48.60 levels and purchased dollars through nationalised banks."

There was good receiving interest in forward premiums and this caused rates to fall. The six-month annualised premium closed at 5.55 per cent as against yesterday's closing of 5.61 per cent. The one-year premium fell by 10 basis points to close at 5.20 per cent.

The spot rupee is likely to remain stable in the 48.60-48.65 range. Said a dealer with a new private sector bank: "There will not be much demand for dollars. But the forex market is governed by the state-run banks these days and they seem to keep the currency around the 48.65 mark."

Forward premiums may go up a bit tomorrow as government paper yields are expected to rise. The treasury head of a private sector bank said: "Going by the recent trend in the government securities market, premiums should fall till the budget (on February 28)." Dealers are expecting the six-month annualised premium in the 5.58-5.62 per cent range and the one-year premium in the 5.25-5.35 per cent band.