Yield Continues To Lift Premiums, Spot Staid

The spot rupee continued to remain stable between 48.68 and 48.71 against the US dollar today in the absence of any significant supply or demand for the greenback. Premiums, however, surged as government paper yields continued their northward journey.

The Indian currency opened at 48.70/71. It strengthened slightly during the day to close in the 48.68-69 range.

A dealer with a foreign bank said: "Trading was very thin today. There was not much supply of dollars from exporters or foreign institutional investors. Even dollar purchased by public sector banks -- that have put pressure on the Indian currency of late -- were absent."

 

Forward premiums increased for the second consecutive day today. The six month annualised premium closed at 5.90 per cent -- 20 basis points up from yesterday's closing level. The one-year premium closed at 5.20 per cent as against yesterday's 5.10 per cent.

According to a dealer with a foreign bank, "Call money rates came down today, but not as much as was expected. Moreover, government paper yields increased substantially. Both these factors hurt forward premiums today."

The spot rupee is likely to hover between 48.65 and 48.70 tomorrow amidst thin trading volumes. Dealers said the supply of dollars is not likely to be good. There should not be much demand from public sector banks.

Forward premiums are likely to remain stable. According to dealers, the six-month premium is expected in the 5.90-5.95 per cent range, while the one-year premium should rule between 5.20 per cent and 5.25 per cent.