Spot Rupee Recovers, Forwards Follow

The rally began with the rupee opening at 45.9. It reached a low of 46.07, after which it appreciated to close at 45.79. The demand in the morning was good at the time the dollar crossed the 46-mark.

Inquiries from the Reserve Bank of India (RBI) pertaining to bank positions brought in an influx of dollars. Exporters sold heavily anticipating restrictive moves from the RBI.

The apex bank has taken initiative to curb volatility in the forex market. It has asked domestic corporates to bring back their overseas issues and loans to the country. The initiative has been confirmed by the RBI governor Bimal Jalan.

He also said that RBI is monitoring the exchange earners foreign currency account. Exporters are permitted to park 50 per cent of their earnings and hold it up to 180 days. RBI estimated the outstanding of exporters to the tune of $2 billion.

This helped to match the demand-supply imbalance for the day and also strengthened the rupee by around 20 paise.

The spot rupee will be range-bound between 45.60-45.80. "Despite the two-way movements in the spot market yesterday, much depends on the opening rate on Monday," a broker said.

"The second phase of the hike in the cash reserve ratio and refinance rates, which is exercised from today is not expected to change the market much," he added.

Forward premiums tracked the spot rupee and looked up by 10-15 paise, especially those of far forwards. The six-month annualised forward premium was 4.51 per cent.

"Trading of forwards was weak and range-bound due to nervousness in the spot rupee," said a dealer in a private sector bank.

In the coming week, importers are advised to stay away from the forward markets till the rupee stabilises while exporters are expected to sell heavily.