Re Likely To Swing In 10 Paise Band

FOREX MARKET

The spot rupee is likely to range between 35.80 and 35.90 against the dollar in the inter-bank forex market this week. If the Reserve Bank of India (RBI) enters the market to purchase the American unit, the rupee could well breach the 35.90 mark.

The forward premiums are likely to range between 4.5 to 5 per cent, as receiving pressure continues to outstrip paying pressure, despite apex bank's intervention.

Another player that could lend suport to the RBI's intervention is the State Bank of India (SBI) which enters the market periodically to make purchases for the oil majors.

 

The dollar supplies in the spot market have reduced. However, it continues to outstrip demand. Demand from the corporate sector has been nominal. The RBI did not intervene aggressively in the spot market last week, leading to appreciation in the rupee. It climbed six paise from around 35.87-88 levels to close the week at 35.81-82.

Treasurers feel that the RBI's intervention last week was not as much to support the exchange rate as to infuse liquidity into the money market which was tight following government borrowings during the previous week.

The appreciation of the rupee is essentially on account of poor demand. The importers are confident that the rupee will remain strong for some time. Dealers feel that importers may come in only to cover at the 35.90 levels.

In the forward segment, the premiums are expected to remain soft, with the six month annualised not crossing the 5 per cent mark. Last week, the RBI entered the market purchasing the forward dollar.

This, combined with the high call rates in the money market, added some strength to premiums which appreciated marginally from 4.5 to 4.7 per cent levels.

However, going by the nature of RBI purchases in the spot market, dealers feel that the apex bank's purchases may be limited. Exporters continue to sell their forward dollars, limiting the appreciation of the forward premiums. They fear that the premiums may not rise above these levels for some time.