The spot rupee strengthened further today by two paise to close at 48.6250/ 6300 levels. Forward premiums tracked the government security market and closed 5-10 basis points higher than yesterday's closing levels.
The rupee opened at 48.6350/64 levels. The currency, however, strengthened to 48.6050/6100. At this level, the state-run banks came in and mopped up the greenbacks. This caused the Indian currency to close lower.
A dealer with a new private sector bank said, "The appreciation of the rupee against the dollar was due to the lack of import demand in the market. There was a bit of supply on account of export and remittances. There was also a buzz about some foreign direct investment inflows streaming in the market today."
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In the forward premium market, the six-month annualised premium closed at 5.62 per cent compared with yesterday's closing of 5.51 per cent. The one-year premium was at 5.30 per cent against yesterday's closing of 5.25 per cent.
The treasury head of a private sector bank said, "The rise in the premiums was a reflection of rising yield in the government security market."
The spot rupee is likely to remain stable in the 48.60-48.65 range tomorrow. A dealer with a new private sector bank said, "It seems that the Reserve Bank of India (RBI) wants the Indian currency to remain steady around this level and in the past one week the RBI has been doing the same (through state-run banks)."
Forward premiums may go up a bit tomorrow as the government paper yields are likely to increase. A dealer with a foreign bank said, "The rise in the government paper yield will reduce the interest rate differential in the US and the Indian market and hence the premiums will rise. Actually, the premiums can fall further from this level, only if the RBI takes some rate cut measure.