Bank Buying Offsets Greenback Glut, Steadies Spot

Dollar buying by the state-run banks kept the rupee steady amid huge inflow of the greenback through export proceeds. Forward premiums closed marginally lower on the back of easy liquidity condition.

The spot rupee today opened at 47.91/92 level. The Indian currency strengthened to 47.87/88, but weakened later in the day to close at 47.9150/9175. According to forex dealers, state-run banks -- led by the State Bank of India, Bank of India and Canara Bank -- bought at least $100 million from the market once the Indian unit crossed the 47.90 mark. The public sector banks have bought around $250 million in the current week itself.

 

A dealer with a private sector bank said: "There was huge supply from the exporters and little demand from the importers. The rupee could have strengthened to 47.86, but for dollar buying by the state-run banks." Dealers felt the state-run banks were buying on behalf of the Reserve Bank of India (RBI).

The forex head of a new private sector bank added: "There has been a continuous supply of remittances since the September 11 events. However, it could not add much strength to the Indian currency because of dollar buying by the RBI."

Forward premiums were marginally lower today. The six-month premium closed at 6.28 per cent compared with yesterday's close of 6.32 per cent, while the one-year premium ended the day at 6.01 per cent, the same as yesterday's close.

A dealer said: "The premium market is generally stable nowadays as interest rates are soft both in India and the US. It may be that there was a slight hardening of the interest rates in the US that prompted the fall in premium here."

The spot rupee is likely to be in the range of 47.88 to 47.92 tomorrow. Dealers said the inflow on account of export and remittances will continue. But the movement of the rupee against the dollar will depend upon the public sector banks' activity in the market. Premiums will remain stable around the current levels.