FOREX MARKET
A volatile spot rupee, which last week crossed the psychological 44 mark, saw panic buying grip the market. This led to a shortage of dollars in the market.
Also, with no announcement forthcoming from the RBI, the market believed that this was a deliberate movement.
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This week too some volatility is expected, but not in such large margins. Forwards are seen moving very little this week.
"The rupee is expected to stay around 43.85 to 44.10 levels. The Reserve Bank of India (RBI) will want the rupee to move steadily, and not erratically, as it did the last week. A lot will depend on what the RBI thinks would be a decent level for the rupee to stabilise," said a dealer with a private bank.
"Once the impact of the rupee crossing 44 passes, the rupee will settle in the range of 43.85 to 44.05," said a dealer with a private sector bank. On a conflicting note, some bankers feel that "unless the RBI intervenes, the rupee will settle at levels of 43.92 to 44.05."
"We feel that the rupee will eventually settle at 44.10 to 44.25 levels," said a dealer with a foreign bank. Meanwhile, the forwards market saw much less erratic movements. The reason could be "the steady call rate," affirmed a dealer with a foreign bank. The 6-month (annualised) is expected to be rangebound within 2.25 to 3 per cent. "There is an auction of Rs 5,000 crore on Monday, causing some concerns for liquidity in the market. Unless the rupee really fluctuates like Wednesday, the forwards should remain steady," said a dealer with a nationalised bank.
Importers, as also exporters, should cover in the spot market. While exporters could use the sharp depreciation of rupee to receive, importers should cover their near-term forwards.