The spot rupee ended marginally higher at 46.9650 today against 46.9750 from Monday's close. Forward premiums ended lower from their yesterday close on account of speculation of a rate cut.
"The spot rupee closed higher today by a paisa on account of supplies entering the market with practically no demand, pushing the rupee slightly higher," said a dealer with a foreign bank.
These supplies are believed to be coming from exporters selling in the market. "Along with exporters, there could be some public sector banks selling dollars today," he added.
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"The rupee has been steadily recovering in the last three days, sending out encouraging signs that the demand seen last week was genuine. Mostly all buying was done by an oil corporation with some remittances from the diamond trading corporation," said a dealer with a new private sector bank.
Tomorrow the spot rupee is expected to move in a range of 46.95-46.98 with practically no demand expected again. The Reserve Bank of India (RBI)'s reference rate was 46.97 as against 46.99 on Monday.
Forward premiums came off today due to speculation of a rate cut on the eve of the US Federal Open Market Committee (FOMC) meeting. The FOMC is expected to cut again, increasing the pressure on the RBI to cut interest rates in order to reduce the interest differential between the two countries.
The six-month annualised premium closed the day at 4.83 per cent against 5.02 per cent earlier while the one-year annualised closed the day at 4.89 against 5.01 per cent on Monday.
"Speculations abound about an imminent rate cut on the eve of the FOMC meet. Overnight call rate has been coming off too with today's close at 7.25 per cent," said a foreign exchange dealer.
Tomorrow premiums are expected to soften further. "Tomorrow the premiums should track overnight call rate and watch for signs of a rate cut," said a dealer with a private sector bank.