The spot rupee closed little changed compared with Friday's closing amid very volatile trading. Forward premiums went down following the easy government security market.
The Indian currency opened around the 48.71/72 levels. The currency dipped sharply against the greenback due to demand pressure and it touched 48.7600/7650. It recovered a bit due to huge supply of dollars mainly on account of investment inflows. However, as the news of Pakistan army firing at an Indian plane came, the rupee crashed once again to the 48.75/77 levels. The unit, ultimately, recovered to close at 48.73/7450.
A dealer with a foreign bank said, "Tomorrow being a bank holiday, many of the importers rushed to get a cover for two day's requirements. This created some extra pressure in the morning. But, there was a constant supply of the dollars. However, the news of firing at Indian plane created slight panic. Fortunately, it did not last for long."
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In the forward premiums market, the dip in government paper yields affected the rates. The six-month annualised forward premium closed at 6.07 per cent compared with Friday's closing of 6.10 per cent. The one-year premium ended the day at 5.20 per cent -- same as its close on Friday.
A dealer with a foreign bank said, "Call rates were little high in the morning, but it came down during the day. On the other hand, there was slight fall in the government security yield. Both these factors helped forward premiums to go down a bit."
The spot rupee is likely to be in the 48.65-48.75 range on Wednesday. Forex dealers are expecting that supplies from foreign institutional investors will continue, but there may be RBI intervention through the state-run banks which will prevent the Indian currency from appreciating. Forward premiums are likely to hover around their current levels as stability is expected both in the call money and government security market.