The spot rupee may remain in the 46.85-47 band this week, while the forward premiums may move according to the expected rate cuts.
The spot rupee may continue in a two-three paise range, with regular demand seen from oil and drilling companies added with constant supplies from nationalised banks. On Friday, the spot rupee closed at 46.88, after keeping a two-paise range for the entire day.
With expectations of a bank rate cut, the rupee should remain biddish. "A bank rate cut seems imminent and the market is waiting for it along with the outcome of the Federal Reserve meeting on May 15," said a dealer with a new private sector bank.
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The Reserve Bank of Bank's (RBI) reference rate for the dollar was 46.87 on Friday.
"With Friday's demand keeping the rupee biddish by the end of the session, there should be leftover demand from the same sector on Monday as well," said a dealer.
This week the premiums are expected to track call rates along with the expected bank rate cut. The six-month annualised premium is expected to keep a 4.75-5.10 per cent range, while the one-year premium may keep a 4.80-5.15 per cent band.
"A 25 basis point rate cut is expected in the US following the Federal Reserve meeting on May 15. This has already been factored in the yields in the US as well as the premiums here. A small rally is expected with a Fed rate hike and a probable bank rate cut," said a foreign exchange dealer.
"The coming week should see the premiums in a tight range with rate cut expectations on a domestic and global level. This might cause premiums to spike next week," said a dealer with a foreign bank.
Exporters have been asked to book contracts in case the spot rupee touches 46.95 or goes beyond the 47-mark. Importers have been advised to stay away for now.
On Friday the forwards closed lower with the six-month annualised premium closing at 5.09 per cent, while the one-year annualised premium ending at 5.08 per cent.