Spot Re Poised For Grooved Trek

The spot rupee should stay in the 47.11-47.16 band, while forward premiums are expected to go up slightly this week. On Friday, the local unit remained rangebound between 47.1350 and 47.1550, amidst thin trading volumes.

"The rupee has been stable for more than a month and is moving in a 2-5 paise band. I do not see any domestic or international reason for a change in the environment this week as well," a dealer with a new private sector bank said.

"The Reserve Bank of India (RBI) has enough reserves to support the domestic unit, in case o any international pressure," he added.

Dealers even said that since the apex bank was keen on mopping up liquidity from the money market last week, there are little chances of a sharp weakening of the rupee. According to a dealer with a foreign bank, the mopping up of liquidity would prevent speculation. Hence, if the local currency dips, it would be due to the weakening of fundamentals, he said adding, however, he did not see any major reason for a downturn in the economy's fundamentals during the week.

Forward premiums are likely to go up this week. "Premiums will remain well bid during the week. Though there is enough liquidity, the situation will be marginally tight," the treasury head of a private sector bank said.

Dealers expect the six-month premium to be in the 4.60-4.70 per cent range this week, while the 12-month premium is likely to be in the 4.72-4.78 per cent band.

"There may not be any drastic rise in forward rates, but they are not likely to come down further," a dealer said. The six-month premium closed at 4.54 per cent on Friday compared with 4.55 per cent on Thursday. The one-year premium closed at 4.68 per cent on Friday as against 4.70 per cent on the previous day.