The market expects increased demand from oil companies and diamond trades. Coupled with the high call rates, dealers expect the forwards to rule firm, but below 11 per cent. The rupee, which generally weakens during the end of the month is, however, expected to gain ground again next week.
The weakening trend of the rupee can be seen from the fact that it slid to 35.72 per dollar on Friday, which was the last trading day. The decline took place on a day of very brisk trading. While the demand for the spot dollar increased, that for the forwards fell.
According to dealers, the spot dollar opened around Rs 35.65, but shot up to Rs 35.72 on sustained demand for the greenback. The rupee, however, staged a mild rally closing higher in the range of 35.69 and 35.71.
Dealers expect to see a lot of demand from the State Bank of India this week, which will put psychological pressure on the rupee. Even if the SBI buys only small lots, the very presence of the country's largest bank in the market will put a downward pressure on the rupee. Consequently, the forwards are also likely to come under pressure.
The high call rates too will not help the forwards. The forwards, which reflect the differential between the interest rate of the rupee and the dollar, will stay high as the call rates are high.
Dealers also expect a lot of action in the spot cash market. If the dollar hardens and the calls remain high, a lot of dealers are expected to arbitrage between the forex and the money market. This will lead to the premium shooting up in the cash spot segment.