Dollar sales, inflows to support rupee

OUTLOOK/ CURRENCY

The spot rupee is expected to hover in the range of 44.90-45.25 during the week. Some market players feel the rupee might touch 44.80 if there is no support at higher levels.

The dollar is expected to appreciate against other global currencies, which may put downward pressure on the rupee.

However, forex inflows and dollar sales by banks to generate rupee liquidity will continue to support the rupee.

Dollar supplies are expected to continue as most of funds, which were sitting on the fence waiting for an outcome of the US elections, will start fresh allocations.The pressure will be off rupee as the month-end demand is over.

A forex dealer said, "While interest rates are high across the globe, political stability and good economic fundamentals backing high interest rates in India are attracting fresh inflows from overseas.

Forwards to stay buoyant

Forward premiums are expected to be buoyant. While forwards will track the spot rupee, upward pressure will be seen on account of rising call rates.

Owing to a dearth of liquidity in the money market, the call rate, the rate at which banks borrow and lend funds for daily requirement, has been shooting up much above the floor of the repo rate of 4.75 per cent.

Moreover, owing to rising oil prices, oil companies will continue to book dollars for future payment.

Recap: The spot rupee touched a 5-month high breaching levels of 45.20, while forwards kept rising given the liquidity crunch in the money market.