The spot rupee weakened by seven paise over Friday's levels to close at 47.91/92 due to the continuing tension on the Indo-Pak border. Forward premiums zoomed as the government security yields rose.
The Indian currency opened in the 47.83/84 range and dipped sharply to touch 47.94/95. The unit, however, gained a bit in late trade to close at 47.91/92.
A dealer with a private sector bank said, "There was some genuine corporate demand for the greenbacks. As the rupee touched 47.95, a handful of public sector banks and a private sector bank sold dollars which stopped the rupee's fall."
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Dealers said that foreign banks were generally absent today on the eve of their financial year ending.
Forward premiums tracked the yield movements in the government security market and closed at 20-25 basis points higher than Friday's closing level.
The six-month premium closed at 6.65 per cent against Friday's closing of 6.40 per cent. The one-year premium ended the day at 6.32 per cent against the previous close of 6.10 per cent.
Another dealer said, "Yields in the government security market went up quite a bit since Friday. Premiums moved today in accordance to that."
The spot is likely to depreciate by another 5-7 paise against the dollar on Wednesday as resolution of border conflict is not in sight yet.
A dealer said, "The spot rupee is likely to move down as the corporates may come to cover their position if the border situation does not improve. However, we feel that the Reserve Bank of India (RBI) has enough forex reserves and it will intervene in the case of the rupee falling sharply."
Forward premiums are expected to remain stable with upward bias. According to forex dealers, six-month premiums can breach the 6.70 mark while the one-year premium is expected to move over 6.35 per cent.