Banks $ Greed Shaves Re, Premiums Dip A Bit

The spot rupee fell by more than six paise today due to heavy dollar buying by state-run banks to close in the range of 48.4150/4250. Forward premiums dipped marginally due to the fall in government paper yields.

The rupee opened at 48.35/36 level today and remained range-bound for most part of the day. The currency, however, dipped sharply against the dollars and crossed the 48.40 mark.

Money market dealers said state-run banks led by the State Bank of India, Bank of Baroda, Bank of India were the main buyers for the greenbacks. It seemed that the buying was done on behalf of the Reserve Bank of India (RBI).

 

A dealer with a foreign bank said, "the supply of greenback was not good today. Moreover, state-run banks bought dollars heavily to render comfort to the exporters and they were successful to a great extent as the currency fell sharply."

In the forward premiums market, the six-month annualised premium closed at 5.69 per cent compared with yesterday's closing of 5.71 per cent. The one-year premium ended the day at to 5.49 per cent compared with its previous close of 5.50 per cent.

The rupee is likely to hover around 48.40-48.45 against the dollar tomorrow. Said a forex dealer with a new private sector bank: "We expect that the public sector banks will continue to mop up dollars from the market and will drive down the currency to the 48.50 mark by the end of the week."

Forward premiums are expected to remain range-bound with a southward bias as government paper yields are expected to continue their southward journey. The treasury head of a private sector bank said: "If the public sector banks continued to buy dollars from the market, the liquidity will ease further and this will facilitate the dip in government paper yields. This will help the premiums to come down as well." Forex dealers said that the six-month annualised premium is expected to hover in the 5.65-5.70 per cent range. The one-year premium is likely to remain in the band of 5.45-5.55 per cent range.