Spot Rupee May Rule Around 47.15

The spot rupee is likely to rule in the 47.12-47.20 band against the US dollar this week. Forward premiums should track the volatility in the inter-bank call money market. Six-months annualised premiums will stay in a biddish tone, hovering in the 4.6 to 4.8 per cent range.

The local currency is expected to touch 47.30-47.50 levels in the next couple of months. The Reserve Bank of India will keep an eagle eye on exchange rate movements as the US Federal Reserve is again likely to reduce the Fed funds rate to pump-prime the US economy, and the south Asian currencies have depreciated vis-a-vis the greenback, a dealer with a private sector bank said. "The rupee will find support at the Rs 47.12 level and could break out of the resistance level of Rs 47.20 per dollar during the week," he said.

"If the US Federal Reserve again reduces the key interest rate, the interest rate differential so arising between India and the US will exert pressure on forward premiums," the dealer explained.

"The spot rupee will continue to be guided by liquidity conditions in the market, while forward premiums will be influenced by expectations of softer interest rates," said a dealer with another private sector bank.

The recent announcement by the finance minister that the Union government could resort to increased borrowing over and above the budgeted target if the ministries increased productive spending will put pressure on forward premiums, he added.

The rupee has been gradually depreciating since the beginning of this financial year. As on April 3, 2001 the rupee was quoted at Rs 46.60 to a dollar. It fell to Rs 47.05 on April 17, touched Rs 47.10 on May 23, and finally dipped to a life-time low of Rs 47.21 on July 3.

The local unit has gained in strength lately and was last quoted at Rs 47.1500/1550 on Friday due to exporter dollar sales and unwinding of long positions by banks.