Re Inert On $ Demand, Premiums Pale

The rupee closed today around Friday's closing level of 49.04-49.05 on the back of corporate demand. Forward premiums dipped due to the easy liquidity condition and the decline in government paper yields.

The rupee opened at 48.99/49. But there was pressure on the currency since morning and according to forex dealers a big industrial house was buying dollars heavily through the banks across-the-board.

A dealer with a private sector bank said: "There was no panic in the market as the dip in the currency from its morning levels was purely due to high demand. However, a section of market participants expected the state-run banks to step in and supply dollars which did not happen."

 

In forward premiums, the six-month annualised premium closed at five basis points lower at 5.90 per cent. The 12-month premium closed at 5.53 per cent against Friday's close of 5.55 per cent.

Dealers said that it is the easiness in the money market liquidity condition which helped forward premiums to come down, while the reduced tension at the India-Pakistan border also played its part.

The rupee is expected to remain in the 48.95-49.05 range tomorrow. A dealer with a foreign bank said: "It will be a pretty stable market tomorrow. We do not see any pressure on the currency due to the border tension. We are also expecting dollar inflows in a stable cross-border situation. However, The RBI will not allow the currency to appreciate too much as it will hurt the exporters' sentiment."

Dealers feel the premiums may drop further. The six-month annualised premium is expected to remain in the 5.85-5.90 per cent range, while the one-year premium is likely to rule in the 5.45-5.55 per cent range.