Corporate Demand For $ Trips Re, Forwards Ease

The rupee weakened by four paise today to close at 49.04/05 today on the back of corporate demand. Forward premiums went down following news of stability on the border front and also the drop in government yields.

The currency opened at 48.9850/9950 but continued to go down during the day. However, as forex dealers said the Reserve Bank of India was supplying dollars through state-run banks and it prevented the rupee from going down too much.

A dealer with a private bank said: "There was genuine dollar demand from private and foreign banks. There was no panic as the central bank came to check the rupee's fall."

 

In the forward premium market, the six-month annualised closed at 5.95 per cent against Thursday's close of 6.03 per cent, while the one-year premium closed at 5.55 per cent. Yesterday, it closed at 5.62 per cent yesterday.

Dealers said the dip in government yields and the soft call rates were the reasons for the fall in forward premium.

A dealer with a private bank, however, said the easing of the border tension also contributed to the dip in premium rates.

The rupee is expected to hover in the range of 48.90 to 49.05 during the coming week. A treasury head of a private bank said: "We will keep a close watch on the border condition. However, the rupee is likely to remain steady as the central bank will prevent any sharp fall by supplying greenback from its reserves."

Forward premium rates are expected to go down as the Rs 6,000 crore released through the reduction in the cash reserve ratio will increase liquidity.

According to the dealers, the six-month annualised premium is expected to remain around 5.85 per cent to 6.05 per cent. The one-year premium is expected to hover in a range of 5.50-5.70 per cent.