Jaya-Factor To Decide Rupee Trend

FOREX MARKET

The rupee is expected to come under pressure against the dollar this week amid uncertainty _ politics is expected to take centre stage as the market-moving factor at least early in the week as the nation awaits the AIADMK's decision over whether it will continue to support the government at the Centre.

Dealers said the rupee would range between 43 and 43.40 with the RBI support at the higher end of the range. They said most of the trades would be in the 43.10-43.30 range. The six-month forward premium was expected to range between eight and nine per cent, dealers said. "All eyes are on the political front," a foreign bank dealer said.

Last week the AIADMK threatened to withdraw support to the BJP-led coalition which came to power in March over the Cauvery river issue. The party has withheld its decision so far.

Apart from the political developments, the other major market moving factor is the Asian crisis which seems poised to enter a third phase. "The market continues to watch the yen, the yuan, and the Hongkong dollar," a foreign bank dealer said.

The rupee came under pressure last week as the Asian markets came under an intense attack from speculators. It pierced the 43-mark to touch its all-time low of 43.35 on Wednesday from which it recovered on intervention by the central bank. After a high-tension drama early last week _ when the yen dropped to 147 per dollar _ the Bank of Japan, the Japanese central bank, came to the yen's rescue through intervention, bringing it to below 145 per dollar.

Meanwhile, the Hong kong Monetary Authority and the Chinese central banks were able to defend their currencies also which has eased tension in the region for the present.But the market views the calm as an uncertain one as the main economies in the region, specially the Japanese economy, does not look set to recover in the next year at least.