Focus on G-7

The eyes and ears of the forex market are glued to the G-7 meeting slated to be held this weekend, said a dealer.

The deliberations at the meeting are expected to throw some hint on how Asian bankers would be reacting to the industrialised nations' demand for a possible appreciation of Asian currencies.

This is likely to ease the burden on European economies in managing the deficit of the United States.

China and Japan are the major economies who are expected to effect a possible revaluation but dealers in the international currency markets are not sure this will happen anytime soon.

Given this backdrop of uncertainty, the spot rupee is expected to rule in a range of 43.60-80 per dollar. Even if the rupee appreciates backed by forex inflows, importer demand will yank it back to that range.

Forwards ranged

Premiums on the forward dollar will be rangebound this week with an upward bias. This is because month-end demand by both oil and non-oil importers will be compensated by inflows from exporters and the foreign institutional investors.

A section of the market feels that forward premiums might inch up sharply as inflows could take a backseat awaiting the outcome of the G-7 meeting.

Interbank players will also put pressure by buying dollars if the US Fed chooses to hike its funds rate by another 25 basis points.

Currency strategists feel that any dollar rally will be short lived as the US deficits are too serious and weigh down heavily on the fundamentals of the world's largest economy.

Recap: The spot rupee remained rangebound last week, at 43.70-82 per dollar. Premiums on the forward dollar, however, rose on demand from oil importers as well as interbank players.