Export Inflows To Keep Re Stable

The spot rupee is likely to remain stable around 48 against dollar during the week as dealers are expecting the supply to improve on the back of more exports proceeds entering the system.

A dealer with a private sector bank said, "The exports proceeds have already started coming in and the trend will continue during this week as well. We do not expect much importer's demand as well. In such a condition, Indian currency is likely to remain stable against the greenback."

A dealer with a foreign bank also said that the foreign funds inflow may also increase as the initial tension pertaining to US-Afghanisthan war is over. "This will further help the rupee to strengthen against the dollar," he said. He mentioned that the Reserve Bank of India's (RBI) reiteration of meeting any temporary mismatch in the demand and supply of dollars also helped the market sentiment to improve.

 

Dealers, however, said that the rupee is not likely to strengthen much above the 48-mark as the RBI is likely to mop up dollars from the market through public sector banks.

Said the forex head of a private sector bank, "The state-run banks have lost some dollars earlier in order to support the rupee. They will now try to rebuild their holding. Moreover, the RBI may not like the rupee to appreciate too much as it will hurt exporters' interest."

The spot rupee was traded in a very thin range of 48.005-48.04 on Friday. It opened around 48.03/04 in the morning, but gradually strengthened during the day to touch an intra-day high of 48.005. The unit, however, weakened a bit in the afternoon on the back of the state-run banks' demand and closed at 48.02/03.

Forward premiums are likely to remain stable during the week with a downward bias on the back of a very stable forex market condition. Dealers are expecting the 6-month premium to come below 6.15 per cent, while the one-year premium should go below 5.90 per cent by the end of the week.

Forward premiums remained rock steady on Friday in tandem with the behaviour of the spot rupee against the greenback.