Spot Re May Settle Around 40.80

FOREX Market

The spotlight will be on the rupee following Standard & Poor's decision to revise the outlook on India's rating to negative. The spot rupee should trade in the band of 40.60-40.80 against the dollar.

The sentiment would be against the rupee and it would be under pressure except for selling by the State Bank of India.

There are fears that following the revision in the outlook coupled with the imposition of sanctions there would be a decline in the foreign exchange flows.

According to some forex dealers they feel that corporates could come in large numbers when market opens today to hedge their exposures. Forex dealers are confident that Reserve Bank of India would stem any volatility in the market.

 

A section of the market feels that the possibility of the spot rupee touching 41 is not ruled out. On the other hand, Arvind Sethi, managing director, global capital markets group, Bank of America believes that the developments had been discounted by the market and the spot foreign exchange market should not be affected.

Six-month forward premiums are expected in the range of 7 - 9 per cent. The forward premiums could toe the spot movement and if spot is volatile the premiums would move up. Last week the spot rupee was traded in the region of 40.50- 40.80 while premiums declined last week after having gone up across the board the previous week following the imposition of sanctions.

On Friday, one-month premiums closed at 5.92 per cent (8.49 a week ago), three month at 7.56 per cent (8.92 per cent), six month at 8.24 per cent (9.08 per cent), and one year at 8.53 per cent (8.88 per cent).