Premiums Raise Spot Rupee

Dollar selling by exporters in order to cash in on the high premiums and decision by importers to stay away from the market due to the high premium levels saw the spot Rupee appreciate to close at 42.10-14 vis a vis the dollar as against Tuesday's close of 42.28-30.

The State Bank of India was not active in the market yesterday.

Given that the yen has strengthened against the dollar and the domestic stock market has perked up, the sentiments in the Indian forex market are also expected to improve and the possibility of Rupee appreciating above 42 today is not ruled out. If the Rupee does appreciate beyond 42, dealers feel that there would some amount of paying.

 

Forward premiums continued to rise with one month closing at (per cent) 14.70 (13.43 on Tuesday), three month at 13.12 ( 12.83), 6 month at 12.16 ( 11.95) and one year at 11.31 ( 11.20).

Given the lack of demand and good selling by exporters the Rupee appreciated. The spot Rupee opened at 42.27-30 and traded at an intra day low of 42.33-35 and closed at a high of 42.03-05. The RBI's reference rate was 42.25 as against 42.37 on Tuesday.

"Exporters were selling forward as they were advised by the banks to sell a major portion of their receivable. Premiums are at unrealistically high levels", said a forex dealer. Importers stayed away on expectations that premiums will decline eventually.

"The downside of not covering at such high levels is small. Hence importers stayed away yesterday", said a dealer.