Spot Up Half A Paisa, Rate Cut Buzz Dents Forwards

The spot rupee closed the day at 46.96, half a paisa higher against 46.9650 from Tuesday. Forward premiums also came down by the end of the trading session to end about 2-3 paise lower.

"The spot rupee remained range bound in the narrow range of 46.9550-46.9675, sustaining on the little supply that trickled in from exporters," said a dealer with a new private sector bank.

The spot rupee traded in the narrow range due to petering out demand. "The main purchaser was a public sector bank," said a dealer with a new private sector bank.

The supply kept trickling in from exporters and some stray selling by banks, and since the demand was just enough, the rupee appreciated before its close, he added.

 

The Reserve Bank of India's (RBI) reference rate was 46.96 against 46.97 on Tuesday. Tomorrow the spot rupee should keep a similar range with the rupee trying to test higher levels of 46.94/95. "The rupee should move in a narrow range of 46.95-46.98 tomorrow and for a few days to come," said a foreign exchange dealer.

Forwards inched lower in the afternoon as talks of a rate cut and stable call rates encouraged inter-bank receiving. "With expectations of a rate cut reaching its high today, premiums came off considerably," said a dealer with a foreign bank.

Talks about expected rate cut have been doing the rounds for quite a while, pushing premiums lower. Call rates are expected to be stable on comfortable liquidity.

"If there is an US Fed rate cut tonight, it will increase the pressure on the RBI to cut the interest rates in order to reduce the interest differential between the two countries," said a dealer with a private sector bank.

The six-month annualised closed the day at 4.80 per cent as against 4.83 per cent while the one-year annualised premium closed the day at 4.85 against 4.89 per cent on Tuesday.

"If the speculation, whether the bank rate cut will take place or not, continues, forward premiums should come off some more tomorrow," said a dealer with a private sector bank. The range followed by premiums should remain between 4.80-4.95 per cent on the medium and long term curve.