Re Seen Steady On Ample Dollar Inflows

The rupee is likely to remain stable against the dollar this week as dealers are expecting a steady supply from exporters and little importer demand. The Indian currency should range between 47.95 and 48.05.

Said a dealer with a private sector bank: "The exports proceeds have already started coming in and the trend will continue this week as well. We do not expect much demand from importers as well. In such a condition, the local currency is likely to remain stable against the greenback."

A dealer with a foreign bank said foreign funds inflow may also increase as the initial tension pertaining to the US-Afghanistan war is over. "This will help the rupee strengthen further against the dollar," he said. He pointed out that even the Reserve Bank of India is not worried about the forex market. Otherwise, it would not have taken the liquidity-easing measures in its credit policy, he said.

 

Dealers, however, said the rupee is not likely to strengthen much above the 48-mark as the RBI is likely to mop up dollars from the market through public sector banks. The forex head of a private sector bank said: "Going by the real effective exchange rate, 48 should be the current level and hence the state-run banks will try to protect that level."

The spot rupee was traded in a very thin range of 48.005 to 48.04 on Thursday. The spot rupee opened in the range of 48.03/04 in the morning, but gradually strengthened during the day to touch an intra-day high of 48.005. The unit, however, weakened a bit in the afternoon on the back of demand from state-run banks and closed at 48.02/03.

Forward premiums are likely to remain stable during the week with a downward bias on the back of very stable forex market conditions and soft call money rates. Dealers are expecting the 6-month premium to touch 5.60 per cent, while the one-year premium should go below 5.50 per cent by the end of the week. Forward premiums remained steady on Thursday in tandem with the spot rupee.