Flighty Run For The Rupee On Cards

The rupee is likely to continue to be volatile this week and will move in a wide range of 47.80-47.20 per dollar.

It spot rupee rises to 47.15/dollar levels, there could be some consternation among players.

The rupee had closed at 47.09 per dollar on Friday. It had touched an intra-day high of 46.80 on May 23 and a low of 47.11 on Friday.

According to dealers, the dollar has seen significant corporate buying, especially by entities in the petrochemical sector.

Also, as the rupee started reversing its trend and started depreciating against the dollar some banks started covering their short positions.

 

Nationalised banks had been buying dollars continuously the Rs 46.80 range all the way up to the Rs 47 range.

Corporates had started buying dollars as they felt that the rupee was slipping and they wanted to cover their positions.

Importers also came into the market and exporters, who had been selling forwards, also started covering their positions.

Dealers are keeping a close watch on how the market is going to react on Monday.

They feel that if the rupee opens at around 47.05 and stays above that mark, then the market is going to take a cue that the RBI would like to see the rupee above the 47/dollar mark. This move is also seen helping the exporters.

Last week, even as there were good supplies for the first three days, the flow of greenbacks had dried up in the last two days.

Dealers feel that exporters and others are likely to bring in dollars as and when the rupee starts depreciating more.

Wider range presaged for forwards

Premiums are expected to range between 1.10 and 1.50 per cent for the 6-month forward and 1.30 and 1.75 per cent for 1- year dollar.

Forwards have come under pressure from importers and banks both of whom were covering owing to the volatility on Forex Avenue.

Premiums stiffened during the later part of last week while the initial part witnessed overwhelming demand for cash dollars.

This had resulted in cash-spot dollars trading at a discount as against the normal premiums.

Thereafter the demand also shifted to long-term forward dollars. The pressure on cash dollars was owing to month-end requirements last week. But a section of players say this pressure is likely to last for a while.