The spot rupee strengthened to close at 48.2850/2950 against the US dollar today as the Indo-Pak border tensions eased further. The local currency closed at 48.3400/3450 yesterday. With today's rise, the rupee has strengthened by 13 paise in the last two days. On Friday, the currency closed at a historic low of 48.41/42. Forward premiums dipped marginally today.
Indian unit opened at 48.32/33. It strengthened over the 48.30 mark within an hour and stayed there for the remaining trading hours. Said a dealer with a private sector bank: "Some exporters who were holding their earnings abroad due to the border tensions, brought in dollars today. This helped the currency to strengthen against the greenback today."
Another dealer with a foreign bank said: "The rupee did not appreciate too much because there was concern that the state-run banks might intervene if the currency gained too much."
Forward premiums fell by 2-5 basis points at the short end. The six-month annualised premium closed at 6.20 per cent as compared with yesterday's closing of 6.25 per cent. The one-year premium, however, remained steady at six per cent level.
The treasury head of a private sector bank said: "Even though the rupee appreciated today there was a slight dip in yields of government paper. Moreover, there could be a further decline in the US Fed rate. This kept the premiums range-bound."
Rupee is likely to gain against the dollar tomorrow, but a lot will depend upon how the public sector banks behave. Said a forex dealer: "The inflow of dollars on account of foreign institutional investments has been good. But if the Reserve Bank of India (RBI) mops up dollars through state-run banks, the rupee may not be able to appreciate too much." Forward premiums are expected to remain range-bound. Forex dealers expect the six-month annualised premium to be in the range of 6.18 per cent to 6.23 per cent and the one-year premium in the range of 5.98 per cent to 6.02 per cent.
