Mint Road to keep rupee on a tight leash

OUTLOOK/Forex Market

The rupee is likely to remain in a range of 45.45-60 against the dollar this week.

The Reserve Bank of India (RBI), through public sector banks, is likely to maintain a tight leash on the local currency. The other factor to watch out for is the flow of funds in by the foreign institutional investors (FIIs).

The rupee closed on Friday at 45.5050/5150 against the dollar. It had opened on last Monday at 45.54/55 and slipped to 45.56/57 on the same day on the back of dollar demand from a car company. It, however, strengthened after that.

Public sector banks were been continuously mopping up dollars last week too. They hafe not allowed the rupee to break the 45.50/$ mark.

Meanwhile, India's forex reserves as have risen to $98.959 billion, a rise of $1.439 billion in a week to December 12, 2003.

According to market participants, the reserves may have already topped the $100 billion mark last week on the back of rising FII inflows into the country FIIs have already invested $758 million in India till December 17 and inflows this year have topped $7 billion.

According to dealers the net inflows from FIIs this week may cross the $1 billion mark. The last three weeks have seen net inflows of more than $1 billion.

The rise in reserves is also on the back of a strengthening of the euro and the pound sterling against the dollar.

The euro closed at 1.2390 against the dollar on Friday as against 1.228 per dollar on December 12 and 1.2170 per dollar on December 5.

The pound sterling closed at 1.7742 against the dollar on Friday as against 1.7470 on December 12 and 1.7295 on December 5.

According to senior forex dealers, the rupee would have depreciated had it not been for the huge FII inflows.

Meantime, credit offtake in the banking sector has shown some signs of pick-up and imports on the back of it would also increase, they said. In a normal situation this would have caused the rupee to depreciate.

Forward premiums

Forward premiums weakened by the end of last week. On Friday, the six-month forward closed at 0.08 per cent, while the one-year forward ended at 0.26 per cent.On December 15, the rate had touched 0.39 per cent, while the six-months forward stood at 0.25 per cent.