Spot Noses Up On Flat $ Orders, Forwards Follow

The rupee strengthened by two paise against the US dollar today to close at 48.64/6450. Forward premiums firmed up as government paper yields rose marginally today.

The Indian currency started the day at 48.67/68. But, the local unit started going up against the greenback and closed at 48.6400/6450. Dealers said there were not much supplies of foreign funds, but the lack of demand for dollars from importers helped the rupee to appreciate.

Said a dealer with a new private sector bank: "Trading volumes were low in the forex market. One of the main reasons for the rupee's appreciation was the absence of demand for dollars from state-run banks."

 

Forward premiums went up during the day. The six-month annualised premium ended the day at 5.51 per cent as against yesterday's closing of 5.45 per cent. The one year premium moved up to 5.25 per cent from yesterday's closing level of 5.22 per cent.

Said the treasury head of a private sector bank: "Premiums moved in tandem with the change in government paper yields. There was no other pressure." Governments security prices came down by 15-20 paise at the medium and long end of the market today.

The spot rupee is likely to remain stable in the range of 48.60 to 48.65 tomorrow. Said a dealer with a foreign bank: "Typically, before the budget, the currency is kept stable and we do not see any exception this time. The Reserve Bank of India will intervene through the public sector banks as and when there will be instability in the market."

Forward premiums are expected to remain stable with an upward bias tomorrow. Forex dealers said, as government security yields are likely to rise tomorrow, there will be pressure on forward premiums. A dealer with a public sector bank said: "We do not see government paper yields going down in a big way in the near future. Hence, the premiums should remain stable or fall."