Rupee May Remain Steady Against Dollar
FOREX Market
The spot rupee is expected to remain steady against the dollar, ranging between 35.75 and 35.85 depreciating only when the Reserve Bank of India (RBI) enters the market to buy the dollar.
In the forward segment, the market is likely to witness good receiving interest from exporters who are seeking to sell their forward dollar at the best rates available. Hence, the six-month annualised premium on the forward dollar is expected to remain soft ranging between 4.5 and 5 per cent.
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The RBI is expected to enter the spot market next week buying the greenback. However, market sources feel the RBI would not be an aggressive buyer. It is likely to make only nominal purchases throughout the week. Last week, the RBI did make aggressive spot dollar purchases prior to the auction of Government of India paper on May 28.
Market sources felt the RBI had entered the market for two reasons -- to support the dollar thereby curbing the export competitiveness of the country, and also infusing liquidity in the money markets so as to ensure that the apex bank can sell the government paper at a competitive rate.
This week, although the liquidity in the money market is good, the RBI will be conducting repo auctions on June 2 and 5. This is likely to correct the excess liquidity situation and provide leverage to the RBI to mop up a few dollars.
In the forward segment, the premiums have remained soft. Some month-end pressure during the middle of the last week saw the premiums inch up slightly as corporates and banks made purchases of forward dollars and renewed forward dollar contracts which has matured. After this demand exhausted, premiums again slipped sharply from 4.9 per cent to 4.6 per cent within a day.
This was on account of good receiving interest in the market and lack of paying interest. The paying interest these days is coming largely from corporates who have opted for foreign currency loans and external commercial borrowings and not from importers who are the traditional payers in the markets.