Re Expected To Remain Range-Bound
FOREX Market
The rupee is expected to remain range-bound, ruling between 38.70 and 38.90 in the foreign exchange market this week.
Forward premiums will continue to soften as there is no demand pressure in the forward market, unless the Reserve Bank of India (RBI) pays the premium in the market.
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The near-term premiums should hover around nine per cent and the six-month premium around 13 per cent.
With the markets witnessing a stable period, corporate demand has slowed down in the spot and the forward market.
However, inter-bank trading has slowed down as banks remain uncertain about the present stability as well as the apex banks gameplan.
Banks dont want to be caught on the wrong foot, a treasury official said. Compounding this is the political uncertainty and the possible India downgrading by Moodys.
Everyone is adopting a wait-and-watch policy, one banker said.
In the spot market, the rupee may be range-bound. Any movements are likely to be dictated more by State Bank of Indias (SBI) activities. Other than SBI, corporate demand is not expected to be very high. Supply is expected to outstrip demand as exporters bring in their remittances. In the forward market, the lower premiums may attract some importer-paying interest in the forward market.
Earlier, when the premiums were very high, importers were keeping out of the forward market.
With the spot ruling steady, many banks were advising importer clients to wait for the maturity of the repayment and purchase dollars from the spot market to meet their payment requirements instead of buying them in the forward market.
However, banks are now asking corporates to book the premiums for the near-term as they are at more reasonable levels. Moreover, with the uncertainty surrounding the elections, banks anticipating the proverbial storm after the calm, are asking corporates to cover at least a portion of their exposures for April.
Meanwhile, they are advising exporters to take advantage of the prevailing rates in the forward market and receive the premiums particularly for the far-term.