The rupee is likely to remain in a tight range of 46.92-46.97 per US dollar this week, while the six-month forward premium may rule in the 4.90-5 per cent band on the back of stable call rates.
A forex dealer said, "The spot rupee should be in a narrow range during the week. Demand from importers has been observed to come down in recent months, so we do not expect any pressure on the currency from that side. However, inflows from foreign institutional investors (FIIs), which have been high in April, have shown signs of coming down. Both these factors will keep the rupee stable against the greenback."
Inflows from FIIs were low during the first half of the current month ($90 million) compared with more than a $1 billion in April.
A section of the dealers feel that a marginal dip in rupee against the greenback is possible. The chief dealer at a new private sector bank said, "The dollar's recent gains against the yen and the euro have made the rupee dearer on a real effective exchange rate (REER) basis and hence a marginal fall is on the cards."
As on the REER basis the rupee is overvalued by slightly over 3.5 per cent and the dealers expect some adjustments in the nominal value during the week. Analysts, however, feel that the currency will touch the 47.50-mark by the end of this quarter.
Forward premiums, in tune with the movements in call rates, will remain stable. A senior dealer said, "Call rates this week are likely to remain stable on the back of a cut in the cash reserve ratio by 50 basis points, though there will be extra demand in the first week of the reporting fortnight. Hence the forward premiums should be in a narrow range as well."
