The rupee today weakened by 10 paise over Monday's level to close at a six-week low of 48.0500/0507. Forward premiums went up sharply with the government security yields firming up.
The Indian currency opened in the range of 47.94/96 and dipped during the day. Forex dealers said the public sector banks supplied dollars to the market once the currency crossed the 48 mark, but was not able to stop the fall as it touched 48.05 level.
A dealer with a private sector bank said, "Importers being afraid of a possible war were covering their requirement and it was the main reason for the rupee fall."
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Dealers, however, said that the trading volume in the forex market continued to be thin as the foreign banks were out of action before their year-end closing.
Forward premiums continued to go up as the government paper yields firmed further. The six-month premiums closed at 6.85 per cent compared with Monday's closing of 6.65 per cent. The one-year premium rose to 6.45 per cent from Monday's closing level of 6.32 per cent.
The spot rupee is likely to go down further tomorrow as dealers are expecting that the prevailing border tension will hurt sentiment. They said that the rupee may touch 48.15 mark by the end of the week if the situation does not improve.
Forward premiums are expected to remain stable with upward bias on the back of rising government security interest rates. According to forex dealers, six-month premiums can breach the 6.70 mark while the one-year premium is expected to move over 6.35 per cent.
The treasury head of a private sector bank said, "if the possibility of war continued, more importers will come for covering their position. The exporters will also delay in bringing their proceeds. The remittances from abroad will also be affected. With this in the background, the rupee will continue to fall. Premiums will rise as the border tension will push up the government security yields."