Rupee Likely To Be In 39.25-45 Range

FOREX Market

The rupee is expected to trade between 39.25-39.45 vis-a-vis the dollar, while the six-month premiums should be in the 14-16 per cent region.

In fact, the market was taken by surprise by the extent of decline in the value of rupee. Last week, the spot rupee was under pressure and by Friday the Indian currency had lost ground against the dollar to close at 39.34-37. One-month premiums closed on Friday at 13.30 per cent, three-month at 15.22 per cent, six-month at 14.44 per cent, and one-year at 13.29 per cent.

The spot rupee had weakened on account of greenback buying by the State Bank of India and some amount of covering by corporates.

One section of the market feels that premiums should not harden. One reason for this is the money market is flush with funds. Over Rs 4,400 crore is parked with the Reserve Bank of India (RBI) through repos and this should flow into the system. Another view is that short-term premiums could move up while at the far end exporters could book their forward receivable.

On Monday the market could be moved by the trends predicted by the exit polls. There are two schools of thought.

If it indeed is a fractured Lok Sabha, then the sentiments in the foreign exchange market could turn for the worse and rupee could be under pressure. Some point out that the market has discounted these sentiments.

The other view is that if indications are that any one political group could get a majority then the rupee should strengthen.

This would also have a bearing on when the apex bank would decided to start unrolling some the measures that it announced to curb the volatility in the foreign exchange market.