The rupee weakened to close at 48/0025 today compared with 46.98/0025 on Wednesday. Forward premiums continued to rise for the second consecutive day after the 50 basis point rate cut on Tuesday by the US Federal Reserve.
Spot rupee opened in the 47.99/9925 range and weakened marginally to close in the 46.98/9825 region.
According to dealers, despite dollar buying by public sector banks, the shifting of spot settlement date affected the currency's strength. Monday being a holiday, the spot settlement date has been shifted to Tuesday.
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A dealer with a private bank said, "Though the change in spot settlement day has affected the rupee, it was the demand from public sector banks that pushed the rupee beyond the 48-mark."
Forward premiums rose once again today. The six-month premium ended at 6.48 per cent against Wednesday's closing of 6.41 per cent. The one-year premium ended at 6.30 per cent (6.22 per cent).
A dealer with a foreign bank said, "The Fed rate cut and the increase in the interest rate differential between India and US have driven forwards higher in the past two days."
The rupee is likely to remain stable in the 47.95-48.05 band tomorrow. A dealer with a private sector bank said, "The impact of the shift in the settlement day will continue to plague the forex market tomorrow. The currency is likely to open below 48 and may close above it."
Forward premiums are likely to go up by 2-5 basis points tomorrow. A dealer with a foreign bank said, "Most of the impact of the Fed rate cut has already been taken care in the last two days. However, it seems that the premiums should increase even further."
Dealers are expecting the six-month premium to cross 6.50 per cent tomorrow, while the one-year premium may touch 6.35 per cent.