| However, dollar is expected to become strong as both the job data and consumer price index are better than expected. Therefore, while upside to the rupee is capped by global strength of dollar, downside is limited by the inflows. |
| However, bankers fear some liquidation of FII holdings in the equity market for profit booking as the real holiday season has set in. |
| Besides the FII inflows, dollar sales by exporters to realise profit and corporates bring back their ECB proceeds will also add to the rupee appreciation. |
| Premiums seen rigid |
| Forward premiums will remain a bit rigid as with the appreciation of rupee, importers are waiting to book payment. Also the one-way movement of the rupee is not seen sustainable due to the vibrancy of the non-deliverable forward market (NDF) in south east Asia. |
| NDF players operate to take advantage of higher premiums on the underdeveloped countries' currencies. Therefore, whatever arbitrage remains is obliterated fast. |
| Meanwhile, with inflation likely to soften further, the interest rate differential between the rupee and the greenback is getting narrower. This will put an appreciating pressure on forward dollars. |
| Recap: The spot rupee remained highly volatile last week and plunged to week lows of 43.90/$ due to an interplay of trade flows and demand on one side and supply of foreign exchange on the other. |
| Forward dollars continued to remain on the higher side due to NDF play and demand from importers. |
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