Re seen in 43.60-44.10 range

OUTLOOK / Currency

The spot rupee is expected to stabilise in the 43.60-44.10 range. The market will remain volatile with two-way movements.

While dollar inflows and exporter sales will continue to force the dollar above 43.50 against the rupee, the Reserve Bank of India is likely to support the rupee at around 44, said dealers.

Globally, the US dollar has gradually appreciated against key currencies like the British pound and the euro. However, this seems to be not having much effect on the rupee, which is on an appreciation spree.

Some dealers feel the dollar will start gaining as most US economic data is favourable. On the domestic front, things are looking good in terms of the economic fundamentals and reforms on the external front.

India's foreign exchange reserves as on April 9 grew by $3.3 billion to $1116.06 billion which indicates the reaction of exporters to the volatility in the foreign exchange market.

During the last week, exporters booked receivables in the forward market every time the rupee depreciated against the dollar. On the other hand, most of the banks were also caught in short positions.

However, bankers feel, with the rupee stabilising around 44, the volatility in the forex market will come down. Moreover, they feel this will lead to covering of import payments in the near term.

Premiums to recover Forward premiums are likely to recover into positive territory after going into discount last week. Exporters are expected to stop panicking and avoid rushing in to book forward cover for their receivables.

On the other hand, importers are likely to cover payments with forward dollars in view of the negative premiums. This will help the forward dollar come back to premium.

The volatility in the spot rupee caught exporters sitting with unhedged positions off-guard. Both banks and corporates rushed to pick up dollars and this led to the greenback being offered at a 6-7 per cent premium, just for a day. Last week, cash tom (bought in cash and sold in tom) was available at a discount of 7 per cent.

Dealers feel the cash dollar shortage is likely to continue till banks receive dollar funds.

Exporters and corporates who have dollar receivables either in the form of loans or receipts have booked it for six months to one year without a corresponding hedge. But now whichever entity comes to banks to roll over dollar receivables is being asked to book a forward cover as per the RBI requirements.