Re Seen Rangebound On Good $ Inflows

FOREX Market

Good dollar inflows is likely to keep the rupee steady in the spot and forward sections of the inter-bank forex markets despite month-end pressure.

The rupee is likely to range between 35.80 and 35.85. The forward premiums are expected to be between four and 4.3 per cent.

The market might witness some month-end demand. Some importers might enter the spot market to make purchases to meet their month-end requirements.

Most of the corporates have not been booking the dollar forward over the last three months as they have anticipated a stronger rupee.

Hence they might now come in to make some spot purchases to meet their payments.

 

Although there is likely to be some pressure on the dollar, this it might be absorbed by strong dollar inflows from external capital inflows from corporates, borrowing in foreign currency as well as foreign direct and institutional investment.

Another player in the spot market is likely to be the Reserve Bank of India (RBI).

The apex bank which has been a passive buyer in the market has been able to prevent the rupee from depreciating below 35.80 levels during the last week.

According to some dealers, the Reserve Bank of India may enter the market this week, as it might want to shore up its reserves as its year-end approaches on June 30.

The forward market also remains quiet. While month-end renewal of contracts may put some upward pressure on the rupee, the premium on the forward dollar is not likely to rise more than one or two paise across the board as the supply is enough to outstrip any demand.

Moreover, the apex bank is not likely to enter the market

to lent support to the forward dollar. Dealers feel the Reserve Bank is waiting for the government to announce the oil price hike. When the oil majors come in to buy the spot dollar, their action will influence the forward dollar also.

Dealers said export competitiveness of exporters which may suffer in the short term will be supported once the oil majors come to the markets

aggressively.