Rupee may rule around 45.25/$

OUTLOOK/CURRENCY

The global weakness in the dollar is expected to continue for sometime as the much needed correction happened last week, when the currency gained against all major currencies, bankers said.

Moreover, the recent terrorist attack in Madrid is seen affecting the confidence on the dollar. Coupled with this is the increased inflows from foreign institutional investors who are reported to have participated in the ongoing disinvestment in public sector undertakings in a major way.

In this backdrop, the spot rupee is expected to remain in the range of 45.20-45-30 this week. The upside to the rupee is capped by the intervention of the Reserve Bank of India (RBI) to guard the appreciation of the currency. Last week the RBI was seen protecting the rupee in the range of 45.2550-26, dealers added.

Over a week, forex reserves have gone up by $772 million to $109.132 billion as on March 5. Global gold prices fell between March 1 and March 5 from $400.2 per ounce to $397 per ounce. Similarly, gold reserves fell from $4.289 billion to $4.19 billion during the period.

While India's economic fundamentals look healthy, the international scenario depends on the US data. A section of the market feels that the dollar will start gaining as most of the US economic data have been favourable.

Even the recently released payroll data showed better results compared to last year's figures. Dealers feel that there will be heavy resistance for the rupee around the 45.25 mark on the RBI's support.

However, if the currency goes above 45.25, it could go up to 45.20 against a dollar.

Forwards seen ranged

Forward premiums will be range-bound this week, if not soft, on expectations that the cash dollar shortage will continue for sometime.

This is because exporters and corporates who have dollar receivables either in the form of loans or receipts have booked them for a long period of six months to one year without a corresponding hedge.

Dealers said this had happened when there was no mandatory rule being asked by banks to corporates to book their dollar receivables.

"Now entities which approach banks to roll over dollar receivables are being asked to book a forward cover as per the RBI's requirement," said a dealer.

This apprehension of cash dollar is becoming a barrier for forward dollars to command a premium and more often there are chances of forward dollars going into a discount than premiums.

However, this has been checked by nationalised banks which have been aggressively intervening in the forward market to supply cash dollars as and when the need arises on behalf of the RBI.

Dealers added that the intervention is aimed at warding off the cash dollar shortage not only during the approaching month end but during any time of the month and this is being done with the help of structured swaps as cash spot, cash six-month or cash one-year swaps.

Dealers are of the view that forward dollars will start commanding a premium once the cash dollar shortage has been met up and roll over of earlier contracts have been minimised to a large extent.