Re Seen Ranged Between 43.90-44.10

FOREX Market

From extreme volatility the week before last, to the sanguine conditions last week, the rupee saw little movement. Moving two paise either way, the rupee eventually settled at the 43.97 level Friday last.

"The Reserve Bank of India (RBI) has had an extremely tight hold on the market with most nationalised banks like State Bank of India (SBI) selling on its behalf. This has lead to the rupee stagnating at these levels intentionally," said a dealer with a private sector bank.

This week, however, the spot rupee is expected to trade in the range of 43.90 to 44.10.

 

The 6-month (annualised) is expected to be range bound between 2.10 to 3 per cent.

Most bankers feel the rupee will only cross into the 44 levels if the RBI deems it necessary.

There is a lot of inherent demand for dollars in the market, which is still prevalent and will be met in the coming week.

On a contrary note, dealers from foreign banks feel that if "the RBI continues this disguised intervention, instead of proving beneficial, it may actually result in extreme volatility and we may see another black Wednesday."

The reason they see this happening is, on Wednesday last, when SBI withdrew from the market for a few seconds, the spot rupee dropped in flash.

The drop was however brought under control by nationalised banks, including the SBI, coming back to sell.

This goes on to show that it is the hold that is keeping the rate stagnant and not a demand supply equation.

Importers are advised to buy in case of a dip. However, they are also advised to cover near-term deposits.