Spot rupee closed three paise lower today at the 48.65/66 level amid volatility. Forward premiums remained rock steady in the absence of any major movement in the money market yields.
The rupee opened at 48.62/64 against the dollar and fell sharply to a low of 48.7400/7450. The currency recovered later on to close at 48.65/66. Dealers said dollar buying by public sector banks on behalf of the Reserve Bank of India, along with some genuine corporate demand was the reason for initial fall.
A dealer with a foreign bank said: "The fall of the currency was initiated by the public sector banks, but later during the day, some new private sector banks were also making major purchases from the market. As a matter of fact, it was the supply from the public sector banks in the afternoon that helped the rupee come off its intra-day low."
In the forward premiums market, there was absolutely no change in rates. Both the six-month annualised and one-year premiums closed at yesterday's closing levels of 5.60 per cent and 5.30 per cent respectively.
The rupee is likely to hover in the 48.55-48.70 range tomorrow. Dealers expect corporate demand for dollar to be high, but the central bank may supply dollars if the currency weakens too much.
Forward premiums are expected to remain range-bound with a southward bias. A dealer with a new private sector bank said: "In the government security market, players expect an auction of government paper and the yields are likely to remain stable before the auction. With this in the background, we expect the forward rates to remain around the same level as well." According to forex dealers, the six-month annualised premium is to remain in the range of 5.55 per cent to 5.65 cent, while the one-year premium is likely to hover in a range of 5.27 per cent to 5.33 per cent.
