Us Attack Knocks Re To 48.12, Forwards Surge

The spot rupee closed at a new low of 48.12/14 today following concerns over the international political scenario in wake of the US-led attack on Afghanistan. It had closed at 48.01/02 on Friday.

The currency, however, recovered from an intra-day low of 48.21/22 as the central bank governor reaffirmed that the Reserve Bank of India will help to bridge the temporary demand-supply mismatch in the market. Forward premiums went up by 25-30 basis points across all the maturities tracking the weak rupee.

The spot rupee opened weak around 48.03/04 level in the morning and weakened further to touch 48.22 within a hour of trading. The situation, however, recovered after Bimal Jalan's statement.

 

A dealer with a private bank said, "It was mainly inter-bank demand in the morning that drove down the rupee, but once the announcement from the RBI governor came there was much comfort in the market."

Dealers, however, said that during the day there was some corporate demand as well, but it was matched by the Supply by the state-run bank.

The forward premiums went up following the volatility in the forex market The six-month premium closed at 6.30 per cent compared to Friday's closing of 6.1 per cent, while the one-year premium went up to 6.25 per cent as against Friday's closing of 6 per cent.

A dealer with a nationalised bank explained, "Apart from the volatility in the market, there was another factor -- possibility of another Fed rate cut -- that kept the forwards under pressure."

The rupee is likely to go down further in the coming week if the global political undercurrent continues to remain tense. A dealer with a foreign bank said, "The bottomline is the rise in oil price and if the situation continues like this then the pressure on oil prices will continue."

Forward premiums are also likely to go up. A forex dealer said, "Though there was no liquidity pressure, the forex market volatility and the possible Fed rate cut will continue to plague the forward market." Dealers are expecting the both the six-month and the 12-month premium to touch 6.50 per cent by the end of the week.