Global Turmoil May See Rupee Test 48 Mark

The rupee is likely to go down further against the dollar and test the 48 mark by Tuesday if the global political situation remains inert and the Reserve Bank of India (RBI) abstains itself from intervening in the forex market.

A dealer with a private bank said, "The chances of foreign funds inflow improving appear remote. Moreover, if the international political scenario deteriorates it will have its bearing on the international oil prices as well. In such a situation like this rupee should continue to fall unless the central bank intervenes.

The rupee has lost by 48 paise during the week to close at 47.81/82 on Friday. The currency was under pressure due to outflow of foreign funds and the heavy import covering by the corporates. As the US financial markets were not operational there has been disruption in the dollar supply as well.

 

A treasury head with a private bank said, "On the one hand, the portfolio funds are going out of the country, on the other hand there has been no major export inflow as well and it will go down if the a war starts in the continent. Moreover, import covering by corporates is likely to continue with same or higher pace. Hence, the rupee is poised for weakening further."

Forex dealers, however, feel the RBI will intervene during the week. A chief dealer with a foreign bank said, "The central bank has not done much thus far to stop the downslide, but it may if the rupee fell below 48 mark."

Dealers said the RBI may either mop up liquidity or supply dollars from its reserves. Asking the exporters to bring back their receivables is also another option they added.

Forward premiums are likely to go up further tracking the weak rupee. The treasury head of a private bank said, "Firstly, there is possibility that the importers will opt for covering their future needs and a cut in the Fed rate. Both will push up the forward premiums." Dealers are expecting the six-month premiums to touch 5.85 per cent, while the 12-month may touch 6 per cent by the end of the week.