Dollar Buying Culls Rupee, Premiums Low

Rupee ended marginally lower against the dollar at 46.97 as compared with Friday's close of 46.95 on the back of dollar buying by some firms in late trade. Forward premiums tracked call rates and ended lower.

According to the forex dealers, rupee opened around 46.95 and remained their till afternoon. A dealer with a foreign bank said, "There was spurt in dollar demand from some corporates for routine servicing of foreign loans. This pushed the Indian currency marginally lower against the greenback. Otherwise the local currency stayed around 46.95 throughout the day."

Dealers said that alongwith the corporates there were some financial institutions which were buying dollars in the late hours.

 

A dealer with a private sector bank, however, said, "On the other hand the supply of dollars was lower, today being a holiday in the United State."

Forwards ended lower today as call rates came down to close at 6.75 per cent from Saturday's closing level of seven per cent after the Reserve Bank of India (RBI) reduced the cut-off rate of one-day repo auction by 25 basis points to 6.5 per cent, boosting hopes of softer overnight rates. The six-month forward premium dropped sharply to 4.92 per cent compared with Friday's close of 5.01 per cent.

Dealers said that rupee may fall further against the dollar tomorrow as the US market will remain closed and hence the supply of dollars will be lower.

Money market dealers, however, are hopeful that the dollar supply will improve soon once the equity raised by the domestic corporates will enter the domestic market. "The market is keenly awaiting $161.8 million proceeds of American depositary shares by Satyam Computer Services and another $460 million equity raised by Bharti Enterprises."

"Once these inflows hit the market we expect the rupee to strengthen a bit," he added.

Forward premiums are likely to remain stable as call rates are likely to remain in the 6.75-7.20 per cent range tomorrow. Dealers said that the six-month premiums are likely to remain around 4.90-4.95 per cent.