Spot Seen In Slot, Premiums To Follow

The spot rupee has been extremely volatile in the last week but this week it is expected to remain rangebound between 44.30 and 44.50 per dollar. Forward premiums are expected to track the spot rupee.

Spot rupee saw a lot of action last week, closing at a record low of 44.36 on Friday. It breached the 44 mark on Wednesday, while on Thursday, it plunged to 44.75 levels but recovered after the Reserve Bank of India's (RBI) announcement to wind up at 44.10. On Friday, despite the measures unveiled by the RBI, the rupee continued to decline to close at a new low of 44.36 at the end of Friday's trading.

 

The RBI, in the light of this trend, has announced measures to curb it. It has imposed a 50 per cent interest surcharge on import finance and has increased the interest rate on overdue export bills to 25 per cent. The rupee continued to plummet despite these measures, on account of genuine demand from the corporates in the market. "On Thursday, it plunged more on account of speculative demand than a genuine demand," said a dealer with a private sector bank.

"The local currency will see more volatility in this week, but which levels it will reach will depend on the RBI," said a dealer with a foreign bank.

Bimal Jalan, the governor of the RBI, was very emphatic that a lot of importance was being given to the trade of one currency with the rupee. "Since most of our other important rates are derived, it makes the rupee-dollar exchange rate extremely important," added the dealer with the foreign bank.

"The forwards are expected to track spot rupee in this week but if the rupee plunges mindlessly, the forwards need not follow," said a dealer with a private sector bank.