The rupee dipped below the 48-mark against the US dollar today as international rating agency Fitch downgraded India's foreign currency rating from BB+ to BB and the local currency rating from BBB- to BB+. Premiums went down following ample liquidity in the money market.
The Indian unit opened at 47.98/99 and slipped to touch the day's low of 48.03/04. Forex dealers said there was heavy dollar buying across-the-board in the morning. The State Bank of India was the most prominent buyer. However, once the currency reached 48.04, public sector banks sold dollars and the rupee recovered to close at 48.0200/0250.
Said a dealer with a foreign bank: "There was not much impact of the Fitch downgrade on the forex market. Slight nervousness was there in the morning, but it was corrected later during the day."
More From This Section
A dealer with a private sector bank said: "Two other international rating agencies -- Standard & Poor's and Moody's-- had already downgraded the rating. Markets perceived the Fitch's decision as a follow up to that and hence did not react too much."
Forward premiums eased further as the RBI governor said he was comfortable with the softening of interest rates. The 6-month premium dipped from 6.32 per cent to 6.22 per cent, while the one-year premium ended the day at 6.14 per cent as compared with yesterday's closing of 6.25 per cent.
The forex head of a private sector bank said: "There has been a sharp fall in the government security yields today, signaling an even softer interest rate regime. Though there has been a dip in the interest rates in the United States as well, the fall was sharper here which pushed down premiums."
The spot rupee is likely to remain stable and hover in the range of 47.95 to 48 tomorrow as the impact of Fitch downgrade is likely to be temporary. Premiums are likely to remain stable with a downward bias. Forex dealers are expecting the 1-year premium to drop to 6.10 per cent while the 6-month premium should come down below 6.20 per cent.