Spot Rupee Likely To Cross 35.90

FOREX Market

The spot rupee is likely to range between 35.82 to 35.92, breaching the 35.90 mark, if the Reserve Bank of India (RBI) enters the market.

Another player that could lend support to Reserve Bank of India intervention is the State Bank of India (SBI).

Forward premiums will move in the range of 4.5 to six per cent depending upon the movements of over-night call rates in the money markets.

Good dollar supply in the spot market are likely to continue. The RBI entered the market aggressively last week causing the rupee to weaken by 12 paise to 35.87-88 from 35.74-75 previously.

 

Treasurers feel that the rupee could cross the psychological mark of 35.90, moving in the higher end of the range of 35.82 to 35.92, if the Reserve Bank intervenes.

However, unless the intervention is persistent, which is unlikely, the rupee will soon bounce back to 35.82-83 levels.

This is on account of continued good supplies of the greenback.

"Exporters have taken an opportunity to sell at the present levels, while importers are waiting for the 35.90 level to be crossed," said a dealer while explaining the demand-supply mismatch.

Market sources feel that the rupee is strong on account of absence of demand from the oil majors.

These corporates have opted for various other sources of finance including external commercial borrowings, suppliers' line of credit, and FCNR(B) loans.

The forward premiums are expected to be volatile, largely on account of uncertainty in the call money markets.

The six-month annualised premium is likely to move in the range of 4.5 to six per cent.

The forward dollar premiums will also be influenced by the Reserve Bank's intervention in the spot markets.

Substantial weakening of the rupee could exert upward pressure on the premiums as importers might come in to cover.

The uncertain call rates are most likely to affect the cash, spot and the near forward dollar market.

Hence, the near term forward curve will be very volatile.

As of now, the Reserve Bank of India has not intervened in the forward market.

What market sources feel is that the activity of the Reserve Bank of India in the spot segment is sufficient to influence the forward segment also.