Spot Slips Despite $ Injections, Forwards Follow

Spot rupee ended at a new low of 48.02/03 today, marginally down from yesterday's closing of 47.99/48.01. Forward premiums retracted afresh following relief on three fronts: easier call rates, better liquidity in the money market and a calmer forex mart.

Spot rupee opened around 47.95/96 and stayed in the 47.95-48 band for most part of the day.

The Indian currency, however, breached the 48-mark in the afternoon and closed at 48.02/03. A forex dealer with a private sector bank said: "There has been huge dollar supplies by state-run banks since morning. But it failed to stop the rupee from crossing the 48 mark."

 

According to a dealer with a foreign bank, "Except the public sector banks, all others were buying dollars on the back of corporate demand which pushed the rupee to a new low. But there was no panic and the trading, in the end, was rangebound."

Forward premiums continued to fall as call rates dipped below the refinance rate of seven per cent. The six-month premium dipped by 30 basis points to close at 5.5 per cent compared with Friday's closing of 5.80 per cent, while the one-year premium went down by 40 basis points to close at 5.62 per cent compared with yesterday's closing of six per cent.

A dealer with a nationalised bank explained: "Forward premiums are in a recovery path as the liquidity condition has improved and the panic situation has disappeared from the foreign exchange mart."

The forex market is likely to remain stable tomorrow. The treasury head at a private sector bank said, "There has been little bit concern over the international development, but the dollar supply from the state-run banks are likely to continue."

Dealers are expecting the rupee to trade in the 47.95-48.05 band tomorrow. Forward premiums are likely to decline further as dealers are expecting further easing of call rates and a stable forex market tomorrow. The six-month premium is likely to touch 5.25 per cent, while the 12-month premium may test the 5.50 per cent levels.