The rupee strengthened by five paise today on the back of dollar supplies from exporters and on account of remittances from abroad. Forwards remained stable, even though the yields of government paper touched all-time lows.
The Indian unit opened at yesterday's close of 47.94/95. But the currency strengthened throughout the day to close at 47.91/92. Dealers said, though the public sector banks bought dollars today, it was not sufficient to check the rise of rupee against the dollar.
A dealer with a foreign bank said: "There were dollar supplies from the exporters, as well as through remittances. In addition, there were rumours that a huge amount of foreign direct investment will enter the system very soon. All these helped the rupee close at a higher level, though the state-run banks tried their best to keep the rupee stable." Dealers said, in the last two days, public sector banks have purchased around $100 million from the market. They suspect the buying was on behalf of the Reserve Bank of India (RBI).
In the forward premium market, rates remained steady as the fall in the interest rate in the Indian money market matches the dip in the US interest rate as well. The treasury head of a private sector bank said: "The trading volume was not low, but the rate stayed stable throughout the day." The one-year premium closed at 6.01 per cent, unchanged from yesterday's close. The 6-month premium ended the day at 6.32 per cent as against yesterday's close of 6.35 per cent.
The rupee is likely to strengthen further tomorrow as dealers expect the supply from exporters will continue. However, as the market expects the state-run banks to buy dollars from the market, the rise of the Indian currency against the greenback will be checked. According to the forex dealers, rupee should be in a range of 47.88 to 47.94 tomorrow. Forward premiums will continue to remain stable with the difference between US and India little changed.
