War Overhang To Influence Rupee/$ Run

The rupee is likely to trade in a range of 47.25-40 per dollar this week. Even though the US-Iraq war is moving towards conclusion, its overhang will continue to affect the markets unless peace initiatives take a definite shape.

The forex market in Mumbai was closed on Friday, but the rupee ended at 47.3450/3650 in other markets. It traded at 47.3250 against the dollar before indirect intervention by the Reserve Bank of India (RBI) saw the local unit firming up.

Demand for dollars from a state-owned company (over $200 million) saw the rupee touch the 47.4850 mark before the RBI move drove it down to 47.46/47 levels on Wednesday.

 

The RBI sold dollars in the spot market and bought forwards. There was demand for dollars from another car manufacturer on Thursday too.

Dealers said players were not expecting such demand this week. The dollar lost against the other major currencies on back of weak economic data.

It was volatile against the euro, touching 1.0820, but appreciated and closed at 1.0750.

Against the pound sterling, it closed at 1.5705. More data are expected from the US on April 15 and 16. International markets are waiting for this.

Most of the markets are closed on Monday, Tuesday and Friday this week. With the markets in Mumbai closed on April 11 too, there would be a bunching up of supplies on Wednesday.

Marketmen say the rupee is likely to test 47.30/$ levels. The participants are watching if public sector banks would allow the rupee to break this barrier.

Even if the rupee depreciates because of major dollar demand, dealers said exporters and corporates would start selling the greenbacks, which will ease the pressure.

Dealers expect the rupee to trade in a range of 47.20-25/$ by April end. They see it rising in the short-term and on a real effective exchange rate basis, it could go all the way to around 46.90/$. Remittances from overseas and inflows from exporters are expected to continue this week too.

Forwards

The six-month annualised premium closed on Thursday at 2.44 per cent, while the one-year forward ended at 2.63 per cent. The Reserve Bank of India bought forwards last week.

Forwards are expected to remain in the same range this week too. The six-month annualised rate is likely to be in a range of 2.25-2.75 per cent, while one-year forward is likely to be around 2.40-2.80 per cent. The RBI is expected to intervene and buy forwards this week too.