The rupee is expected to remain steady in the 46.90-47.05 range to a dollar this week due to exporters bringing in their forex earnings and importers not going in for forward cover. Forward premiums should track the spot rupee and move in the 4.90-5.15 per cent range.
During the week, repatriation of proceeds by the exporters coupled with corporates bringing in funds raised abroad are expected to add to the supply and keep the rupee steady against the greenback, a dealer with a private bank said.
"Exporters would like to book profit at the current exchange rate levels and this will see the rupee hold its ground against the dollar," said another dealer.
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Dealers expect the Reserve Bank of India (RBI) to intervene in the market through the state-run banks, which will sell dollars, if the rupee depreciates beyond the Rs 47.05 level. They pointed out that the RBI will also not allow the rupee to appreciate vis-a-vis the greenback due to dollar inflows as the exporters will be affected.
J P Morgan's latest report, "Indian Markets: Outlook and Strategy", in its outlook on the forex markets, says that despite the recent slowdown in exports, the drop in foreign capital inflows, the concerns voiced by rating firms and the overvaluation of the rupee in real terms, the rupee is expected to remain stable this fiscal year. It further forecast that the rupee will ease to Rs 47.50 to a dollar by September-end.
"While export growth has no doubt declined in the past few months, imports have dropped even more sharply leading to a contraction of the trade deficit," the report said. It added that though portfolio investment inflows have visibly slowed down, these are still positive and have, in recent months, been enough to offset the trade deficit.
The country's overall balance of payments remain positive and though the accretion to reserves will probably be moderate, a significant drain in reserves seems unlikely, Morgan said.