Rupee Seen In 48.70-48.90 Range

The spot rupee is likely to hover in a 48.70-48.90 range during the week. Forex dealers said, though the supply of dollars on account of foreign institutional investments (FII) will continue, the Reserve bank of India may mop up dollars to boost the country's exports.

Said a dealer with a foreign bank: "The supply of dollars in recent times is mainly on account of remittances from abroad and FII inflows. The growth in exports, however, has not been impressive. This made the rupee overvalued on the basis of trade-weighted real effective exchange rate.

Hence, the central bank may continue to intervene in the forex market through state-run banks and mop up dollars. This will certainly weaken the rupee."

 

Forward premiums will largely be driven by the movement in government paper yields and call money rates. Forex dealers said as governments security yields are expected to remain stable before the budget, premiums will continue to hover around their current levels during that time. However, some action is expected in the period following the budget.

Said the forex head of a private sector bank: "It all depends upon the central government's decision on small savings rates. If the small savings rates are cut, government paper yields will fall and the forward premiums will follow suit. Otherwise, the premiums can go up."

The spot rupee closed at a new low of 48.7450/76 on Friday and the huge dollar mop-up by the central bank through public sector banks was responsible for the dip in the value of the rupee. Dealers said there was an impressive supply through foreign funds, but the demand from state-run banks exceeded that.

The six-month annualised premium closed at 5.49 per cent on Friday as against the previous day's closing of 5.55 per cent. The one-year premium dipped to 5.17 per cent as against Thursday's closing of 5.20 per cent.