The spot rupee weakened by nine APIs today to close at 48.7450/76 compared with yesterday's closing of 48.66/67. Forward premiums, however, dipped a bit despite the volatility in the fore market.
The rupee opened at 48.68/669 level. The currency dipped a bit in early hours and touched 48.70/72 levels. But there was ample supply of dollars at this levels and the Indian currency touched the day's high of 48.66/67. At this levels, the state-run banks entered the market and mopped up dollars heavily to force the Indian unit to closed at 48.7450/76 levels. Fore dealers said that there were deals even at 48.78/79 levels.
A dealer with a new private sector bank said, "there was good supply of dollars, both on account of remittances and the investment flow. However, the demand by the public sector banks outstripped the supply."
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In the forward premium market, rates fell marginally amid very low volume of transaction. The six-month annualized premium closed at 5.49 per cent against yesterday's closing of 5.50 per cent. The one-year premium dipped to 5.17 per cent as against yesterday's closing of 5.20 per cent.
The spot rupee is likely to remain in the range 48.70-48.90 in the next week. Dealers said that much will depend upon the Budget announcement and as well as the state-run banks' move in the market. Said the treasury head of a private sector bank, "We do not know what the Reserve Bank of India feels about the current strength of the rupee against the dollar. If they feel that it is still overvalued, we can observe one more round of weakening during the week." Forward premiums will track the government paper which will move in accordance with government's decision on the small savings rate.
A dealer with a public sector bank said, "if the small saving rate is cut there will be dip in the government paper yield and as this will reduce the interest rate differential between India and US, premiums will go down."