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| The move reduces the volatility normally seen in the forex market during the end of the month resulting in a temporary depreciation of rupee.
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| As a result, banks, which used to give only month-end quotes for forward dollars, are now putting out odd quotes too such as 14-day forwards, 21-day forwards etc.
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| Moreover, moving with the international practice, dealers are also giving forward quotes for one month and so on pegged to spot rate at any point of the day in any particular month.
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| This has resulted in an increase in the volumes of odd forward quotes in addition to the month end quotes which earlier were virtually illiquid, said players.
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| The development follows from combined efforts on the part of the Reserve Bank of India and the Foreign Exchange Dealers Association of India.
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| Both the bodies are understood to have suggested to forex dealers to advise their corporate clients to space out their requirements.
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| Players now feel that the move has been successful in reducing the month end pressure on rupee which is evident from the narrowing bid- ask spread in the near term forward quotes given in the market.
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| Further, public sector oil companies, which face most of the month-end payment pressures, have started spacing out their dollar buying programme through public sector banks.
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| The buying, in fact, starts from middle of the month and continues in bits and pieces till the end of it now, said a dealer.
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| Dealers said realising that month-end volatility makes dollar buying expensive, oil companies are also entering into oil futures contracts in the international market and dollar-rupee forward contracts in India so as to hegde themselves against volatility.
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| Once bank quotes are made at a par with international norms, the market depth will also increase, said dealers. |
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