Dollar Forward Premia Sliding

The forward rates in the forex market pierced the psychological floor of 10 per cent to touch 9.79 per cent yesterday from 10.35 per cent on Monday.

Yesterday, the premia for March lost ground by 10 paise. On Monday, the forward premia had closed at 185 paise which further lost ground due to the non-swapping by banks to 176 paise. Besides, the easy money market situation is also lending a hand to smoothen the forward rates. An impending cut in the CRR is also leading to an easing of forward rates.

Bankers said that the forward cover cost is "exorbitantly high" which prohibits them from swapping these deposits. In fact, if the swap cost on the FCNR (B) deposit is added to the interest cost the total cost works out to more the prime lending rate of banks.