Spot Rupee Slippery, Forwards Falter Amid Volatility

The rupee weakened today following the terrorist attack on Parliament. Forward premiums were marginally lower than yesterday's close amid very volatile trade tracking the government security prices.

The Indian unit opened at 47.83/84 and touched a day's high of 47.8250/8350. The rupee touched an intra-day low of 47.88/89 as the banks panicked by the terrorist attack sold dollars heavily. The Indian currency recovered a bit later on to close at 47.85/86 as the public sector banks sold dollars.

A dealer with a foreign bank said: "The sentiment was down heavily after the incident and it has brought down the currency. We feel that dollar sales by the state-run banks were on behalf of the Reserve Bank of India (RBI) which always resist too much of volatility in the forex market."

 

Premiums moved in tandem with government paper prices today. Premiums fell in the initial hours as the government security prices picked up substantially. They dropped after the news of terrorist attack came in, even as the government security prices staged a sharp fall. Premiums again softened with recovery in gilts prices. At the end of the day, the 6-month premium closed at 6.32 per cent, compared with yesterday's close of 6.35 per cent, while the one-premium was down at 6.10 per cent from yesterday's close of 6.15 per cent.

A dealer with a new private sector bank said: "The Fed has cut the fund rates and the government security market turned volatile. But as the prices of government paper were up marginally and call rates eased, premiums were down compared with yesterday's level."

The rupee is expected to remain in the range of 47.80 to 47.85 against the greenback tomorrow as the dealers expect a fresh flow of dollars on account of export and remittances from abroad.

Forward premiums will remain stable with a downward bias as the yields of government paper may come down further.