Spot rupee is expected to touch a new low and pierce the 48.50 mark during the week. Forex dealers expect the Reserve Bank of India (RBI) to continue dollar mop up from the market through the public sector banks, which will weaken the rupee against the greenback. Forward premiums are likely to go up reflecting the volatile forex market. Spot rupee touched its all-time low of 48.43 on September 17.
Said a dealer with a foreign bank: "The rupee has lost more than 50 paise in the last one month due to heavy dollar buying by the public sector banks. The currency is overvalued by more than 1.5 per cent and the RBI must be trying to correct this to protect the exporter's interest."
In the forward premiums market too, as the rupee will be under pressure, rates are likely to move up and trading will remain thin. Forex dealers expect the six-month annualised premium to remain in the range of 6.20 per cent to 6.40 per cent and the one-year premium in the range of six per cent to 6.10 per cent.
Said the forex head of a private sector bank: "We do not expect the government paper yields to go up substantially and the call the rates to cross the 7 per cent. However, as the forex market will remain volatile, trading in the premiums will be thin. Moreover, as the US Fed is expected to cut its rate further in its next meeting, the premiums are expected to firm up."
Spot rupee closed at a new at 48.41/42 on Friday. The Indian unit opened at 48.37/38 in the morning and slipped past the 48.40 mark. The weak rupee pushed up the forward premiums rates as well. The six-month annualised premium closed at 6.30 per cent as compared with yesterday's closing of 6.19 per cent. The one-year premiums was up by 9 basis points to 6.02 per cent.
