Re Closes At 48.73/74 After Roller Coaster Ride

The spot rupee weakened marginally today after going through a roller-coaster ride during the day. The Indian currency closed at 48.73/74 as against yesterday's closing of 48.71/72. Forward premiums went up a touch as government paper yields rose during the day.

The rupee opened at 48.72/73. Initially, due to dollar supplies from exporters, the currency strengthened to touch 48.70/71 levels. The Indian unit continued to be traded in the 48.70-73 till afternoon. However, month-end demand pushed it down to 48.7900/7950 levels. It recovered once again due to dollar supplies on account of remittances from abroad and touched 48.71/72 levels. As the supply of dollars came down at the dying moments of trading, the rupee weakened once again to close at 48.73/74.

 

Said a dealer with a new private sector bank: "The up and down movement of the spot rupee was solely due to supply and demand factors. It is difficult to pinpoint any particular class of banks that was selling or buying at any point of time during the day."

The rise in the government paper yield has pushed up premium rates as well. The six-month annualised forward premium closed at 5.58 per cent as against yesterday's closing of 5.55 per cent.

The spot rupee is likely to remain in the 48.70-48.80 range tomorrow. Dealers said there will be some extra pressure on the Indian currency due to month-end demand. However, if the currency goes down sharply, the Reserve Bank of India is expected to intervene and stem the rupee's fall.

Said a dealer with a private sector bank: "The currency is overvalued and hence is poised to fall. However, the central bank will not like a very fall as well."

Movement of forward premiums will depend upon the budget announcement. Dealers said if the government security market receives a boost in terms of a cut in small savings rate, premium rates will dip.