The rupee is expected to harden marginally this week, primarily on the expectation of dollar inflows from the SBI GDR issue.
However, there is a feeling that the spot dollar will touch Rs 35.50, at the most. The RBI will make sure that the rupee does not harden beyond these levels as it will affect the exporter community. Dealers, therefore, said a number traders and banks were off-loading their stock of dollars and booking profits.
The six-month forward premium could slide to 6.5 per cent on an annualised basis, but it may rebound to 11 per cent later.
Through last week, the spot dollar was ruling between Rs 35.68 and Rs 35.70, although it hardened to 35.58-35.60 on Thursday.
Dealers said the stiffening in rates was due to the large dollar sell-off by banks such as SBI, foreign banks and exporters. Importers did not cover forward because they were apparently waiting for the rupee to harden more. By and large, the rupee was quoting around 35.68-35.70.
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This, despite the fact there were two holidays, and even on the days that the market remained open, trading was subdued.
Dealers said the forward premia was around 8.8 per cent, down from the 10.5 per cent a few days ago.
The decline, however, may not persist since the demand for dollars is on the increase, particularly from importers. The rates, dealers feel, could quote around 11 per cent. In the international markets, the dollar scaled a two-year high of 1.5390 against the mark.
At the end of the week, however, there was a marginal weakening of the dollar after the data on jobless figures was released.
The greenback also hardened to a 30-month high of 112 against the yen.
The dollar-Swiss franc rates were also quoting higher at 1.2560. There pound sterling remained steady, ruling around 1.5650.