Rupee likely to rule in 45.80-46/$ band

OUTLOOK/ CURRENCY

The spot rupee is expected to hover in the 45.80-46.00 range against the dollar. The bias will be more towards appreciation both due to the inflation figure ranging at 7.87 per cent and the gradual increase in inflows from corporates, exporters and portfolio investors.

The high price of oil, the country's largest import item, could lift the rupee. Meanwhile, oil prices have started going up to around $48 per barrel after stabilising around $40-42 levels for almost a week.

Inflow of dollars into the Indian market has steadily started going up. Several corporate are also bringing in dollars from the overseas market to invest in Indian rupee dollar forward market where they gain a margin of 20-30 paise.

Moreover there is a feeling that, with the rupee rangebound within 45.80-90, exporters will bring in dollars to realise the proceeds.

But the market expects currency inflows from both portfolio investors ahead of the October earnings season and overseas debt issues by Indian companies stepping up investments.

The outlook in the non deliverable forward (NDF) market, which has turned bullish now as reflected from the forward premiums charged for various maturities, also affected the sentiment in the forex market.

The rupee remained rangebound for most of last week, with action only towards the end. This was because importer demand sprang up with every appreciation in the rupee.

Forward premiums may stay ranged

Forward premiums are likely to remain rangebound this week. However, if the oil prices keep moving up, premiums will start going up. For the time being, the RBI is not in the picture and most of the action is concentrated in the near term.

Corporates selling dollars and exporters bringing back receivables have been the major source of forex inflows for the market. Moreover, portfolio investors are also adding to the liquidity in the market. Therefore, even if the oil demand crops up, there are enough inflows to take care of the demand.

Premiums will soften on the back of receiving interest in the market through dollar selling in the forward market.

Next week, dealers feel, while most of the importer covering is over, there is supply of dollars in the market. Moreover, with arbitrage rife between the overseas rupee dollar market and the domestic market, dealers feel forward premiums on dollars should subside gradually.