Dollar Sales Boost Rupee, Forwards Steady

The Indian rupee strengthen today to close at 49.00/01 against yesterday's closing of 49.040/0450 on the back of heavy dollar selling by the state-run banks. Forwards remained steady even though call rates dipped a bit.

The Indian currency opened at 49.02/03 and dipped to 49.0500/0575 as there was corporate demand. However, in the afternoon the state-run banks sold dollars heavily.

A dealer with a foreign bank said, "We have not heard of any big supply of dollars from abroad. It seems that the Reserve Bank of India (RBI) might have suspected that rupee could fall drastically and, hence, intervened through the state-run banks."

 

In forward premiums market, there was bias towards softer rates because of very low call rates.

However, the trading volume was low as yields on government papers were pretty stable today on the eve of the auction of Rs 6,000 crore. The six-month annualised premium closed at 5.92 per cent against yesterday's close of 5.95 per cent. The one-year paper remained rock steady at yesterday's closing level of 5.55 per cent.

The spot rupee is likely to hover in a range of 48.95-49.05 tomorrow. The treasury head of a private sector bank said, "It all depends upon how the RBI will behave tomorrow. However, it seems that they will not allow the Indian currency to slip below the 49.05 mark. On the other hand the central bank will not allow the rupee to appreciate over 48.95 mark as it will hurt the exporters."

Forward premiums are likely to dip tomorrow amid easy liquidity in the money market and tracking the government paper yield. Forex dealers are expecting the six-month annualised premium to remain in the range of 5.85-5.95 per cent. The one-year premium is likely to hover in the range of 5.45-5.52 per cent.