The spot rupee closed at a new low of 47.85/90 today, falling for the seventh consecutive day. It had closed at 47.81/82 on Friday. The Indian currency, however, recovered slightly from an intra-day low of 48.42 hit in the early hours of trading. Forward premiums went up by 1-1.5 percentage point across different maturities.
The spot rupee opened weak around 47.83/84 level in the morning and weakened sharply during the day to touch an all-time intra-day low of 48.42. The Indian currency, however, recovered because of huge dollar supply by the state-run banks led by the State Bank of India.
A dealer with a private bank said, "The state-run banks arrested the fall in the rupee as it was approaching 48.50 level. Around $100 million was ploughed in by them today."
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Forward premiums continued to go up as call rates were tight in the morning. The rates, though softened a bit, with the recovery of rupee and the fall in overnight rates in the later hours of day, remained high. The 6-month premium closed at 7.15 per cent as compared with Friday's closing of 5.65 per cent while the one-year premium went up to 6.85 per cent against yesterday close of 5.65 per cent.
A dealer with a nationalised bank explained "There has been concern over a Fed rate cut and the importers were also covering their future needs. These, in addition to tight call rates, were responsible for the premiums to rise very high."
The forex market will remain volatile tomorrow due to the concern over international political development. The treasury head of a private sector bank said, "If the war starts it will push up the international oil price and hence will put pressure on the Indian currency."
Forward premiums are also likely to go up after the announcement of Fed rate cut today. A forex dealer said, "We expect the premiums to go up further as the spread between the Fed rate and the benchmark bank rate will increase. However, the rise will be moderate as major part of the impact is already discounted."