Spot Rupee Looks Up, Forwards Spurt

The rupee recovered to remain in the 46.96-47 range today amidst large dollar supplies. Forward premiums rallied as the call rates stayed firm over seven per cent.

The rupee opened at 47 and strengthened during the day to close around 46.96. Dealers said the rupee recovered mainly due to yesterday's bunched-up dollar supplies and remained below the 47-mark.

A dealer with a foreign bank said, "The rupee was slightly weak in the morning due to the demand from state run banks. However, that did not last for long and the currency strengthened during the day.

The rupee closed in the 46.96-46.97 band. Dealers said both foreign as well as private sector banks sold dollars, while public sector banks were the main buyers.

Forward premiums rallied sharply as call rates hovered around seven per cent. The six-month annualised forward premium ended at 5.18 per cent.

The rupee is likely to remain in the 46.95-47.05 band tomorrow. Dealers said though the rupee has recovered a bit today, the respite may not be long lasting.

The chief dealer at a private sector bank said, "As many of the research reports indicate that the Indian currency is overvalued by more than 2.5 per cent against the dollar and hence a dip against the green back is on the cards. Moreover, lower foreign institutional inflows will also exert further pressure on the rupee." Dealers are expecting the rupee to breach the lowest ever 47.10-mark in a week's time.

Forward premiums are likely to go up further as call rates are expected to remain high. Dealers are expecting the six-month annualised premium to remain in the 5.20-5.25 per cent band.