Rupee Rebounds As $ Demand Tapers

Standard and Poor's (S&P) downgrade of the local currency obligations pulled the rupee down against the dollar at the early hours today and the currency opened weak at 47.15/17, against yesterday's close of 47.1225.

However, the Indian unit recovered as there was little follow-through demand and ample supply from the public sector banks. The rupee ended the day at 47.11. one paise up as against its Tuesday's close.

"There was a good amount of speculative demand in the morning which pushed the rupee even lower. Some stray deals got done at 47.19 but since it was primarily speculative, the rupee cold not sustain it. Also public sector banks started selling in order to keep up with the demand. This prevented the rupee from falling beyond the 47.20 level," said a dealer with a new private sector bank.

 

The later part of the trading session saw banks selling in the market to get out of their long dollar positions. This also increased the supplies, he added.

The forward premiums also opened low but recovered by the day's end on account of improvement in the sentiment.

The benchmark six-month (annualised) premium ended the day at 4.78 per cent after touching an intra-day high of 4.84 per cent .

Tomorrow the spot rupee is expected to keep a narrow range of 47.11 to 47.15. The forward premiums will keep a close watch on the spot rupee movements and track the overnight call money rate as well.