Bank, Fii $ Buying Binge Hits Rupee

The rupee weakened by 3 paise yesterday due to heavy buying by nationalised banks which resulted in dollar supplies tapering off. Forward premiums did not have much demand and came off by 3 to 4 paise.

The weakening in spot rupee yesterday spurred a minor panic. "This undercurrents of this demand was accumulating for some time now and it has finally begun to show," said a dealer from a foreign bank.

"The rupee was well bid throughout the day with a good corporate demand in the morning. A nationalised bank and a few foreign institutional investors (FIIs) were buying nearly throughout the day, accelerating the demand for dollars," he added.

 

The spot rupee opened higher than Monday's levels, at 43.6550. It traded in an intra-day range of 43.6550 to 43.6800, and closed at 43.6750.

"Spot should open even higher today and could reach or cross the 43.70 mark, said a dealer with a private sector bank. "Now that it has finally breached the 43.65 mark, and there still is demand, we think the rupee will pierce 43.70 barrier," he added.

Forward premiums saw little movement yesterday due to ample liquidity in the banking system and easy call money rates. The premiums wound up 5 to 6 paise lower than Monday.

"There was a lot of receiving by banks today, hence the forwards closed lower than Monday's levels," said a dealer with a private sector bank.

"There is a lot of redemption of coupons and debentures coming up. This liquidity is making the premiums come off," he added.

The six-month annualised premium ended 5 to 6 paise lower at 2.15 per cent from it Monday's level of 2.38 per cent. The one-year annualised also closed 5 to 6 paise lower from its Monday's level of 2.64 percent, at 2.56 per cent.