Spot Rupee, Forwards See-Saw But End Higher

Forward premiums rose initially but slipped in the afternoon trades. However, it closed 8-10 paise higher than its previous close.

The spot rupee opened around 45.90 in the morning hours and slided down further to 45.95. "The demand was high in the morning hours and the supply from the Export Earners Foreign Currency (EEFC) account has not picked up as yet," said a forex dealer with a private sector bank.

The demand-supply mismatch weakened the rupee initially. "At 44.95 level, there was rumour that the Reserve Bank of India (RBI) was enquiring about buyers at that high level", said a dealer. This prompted the players to sell dollars in the market and the situation eased a bit in the afternoon trades.

The dealers are expecting dollar inflows in the next two working days. This will improve the demand-supply position.

"However, as the demand for dollars are genuine, rupee is not expected to strengthen much, not beyond the 44.75 level," said a dealer.

Moreover, as the large corporates have already started covering for their future import requirements, dealers do not expect the net inflows to cross the $500-million mark. The dealers, however, were unanimous in saying that August 22 will be the crucial day as the next day is the deadline for bringing back balances from the EEFC account.

Forward premiums moved in tandem with the spot rupee. It rose sharply with the fall in rupee in the morning hours and fell as the rupee strengthened afterwards. However, the premiums ended at a higher level in comparison to its previous close.

The six-month annualised premium closed at around 4.75 per cent in comparison to its previous close of 4.68 per cent.

The movement in forward premiums will also depend upon the inflows from the EEFC account. "As nothing much is expected from the EEFC front, premiums are also not to expected fall drastically," said a forex dealer.