FOREX MARKET
The rupee is expected to trade vis-a-vis the dollar in the 39.45 and 39.55 range.
As was the case last week, there would be movement in forward premiums. Premia softened last week anticipating easy money policy, following the 100-basis point cut in repo rate and 50-basis point cut in Bank Rate. Any additional rate cuts would push premia down further.
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During the course of last week the rupee was range-bound between 39.50-39.55 and on Friday the Indian currency closed at 39.51-52. The Reserve Bank of Indias (RBI) reference rate was unchanged during last week at 39.54.
One-month premiums closed at 8.45 per cent, three-month at 8.09 per cent, six-month at 8.17 and one-year at 8.37 per cent.
The spot rupee did not react to the formation of the BJP-led government at the Centre for the foreign exchange market had discounted the developments at the Centre.
This week the market would keenly await for the pronouncements by the finance minister and the commerce minister on the exchange rate. Last week in his press conference after assuming office, finance minister Yashwant Sinha indicated that he wanted a stable rupee.
In his view, devaluation of the currency was only one of the inputs for increasing exports. He is expected to hold discussions with Reserve Bank of India in this regard.