Rupee Seen In 46.15/25 Per Dollar Range

Spot rupee is expected to rule in the range of 46.15-25 per dollar during this week.

With forex inflows continuing unabated, the rupee is expected to breach the 46.10 mark sooner than later.

But players remain wary of Reserve Bank of India (RBI) intervention that could thwart such a possibility.

Meantime, demand for dollars has also started to increase both from importers (who want to cover) and from banks who want to take care of their short positions.

Moreover, cancellation of export contracts, which were earlier booked to realise dollar value as the greenback depreciated, has also contributed to the demand for the US currency.

 

As per the figures released by the RBI in its weekly statistical supplement, forex reserves have gone up by $803 million to $85 billion as on July 25, 2003.

However the copious inflow of foreign exchange to the debt markets, which used be the rule of the day sometime back, has tapered.

The inflows have be good but most of the money has been making its way to the equity market.

Forex St players are of the view that foreign institutional investors might have exhausted their limit of $1.5 billion to be invested in the debt market and inflows are getting invested in the equity market.

However, another section of the market is of the view that with forward premiums going up, the cost of conversion of dollars into rupee with a forward cover for investment in the debt market has also gone up.

Therefore, the arbitrage opportunities that these investors used to enjoy has also substantially come down. Consequently, there has been a tapering of inflows.

The demand for dollars sprouted as the US currency appreciated last week against all major denominations due to signs of economic recovery, especially the second quarter GDP data.

However as the rate of unemployment in the country still remains high, concrete signs of recovery is yet to emerge.

Premiums on the ascend

Forward premiums are expected to go up with the demand for dollars rising. Moreover, export cancellations are also adding on the demand for dollars.

Last week, cash spot was ruling at a par with demand for cash dollars going up substantially to meet month-end requirements, specifically the interbank requirement of cash dollars to cover up short positions (booked through sell buy swaps expecting to book profit with the premiums going up while unwinding positions to buy back the dollars).

However, premiums fell with increasing inflows and public sector banks buying dollars on behalf of the RBI and corporate clients.

The market has perceived through the intervention activities that the RBI is comfortable with the rupee