Dollar forward rates normalise after carry traders unwind positions

Decline in premium to help importers hedge near-term exposures

The spike in near-term dollar-rupee forward premium has normalised after carry traders unwound some of their positions and arbitrageurs set in to take advantage of the peculiar rise in cash-spot rates.
 
The premium for May has fallen to around its normal level of 30-32 paise, from 50-54 paise on Monday. The cash-spot premium, which is used by banks for swaps, had indicated a forward premium rate of 16 per cent.
 
The rates had also jumped as dollars accumulated in the system following the initial public offering of PowerGrid’s infrastructure investment trust (InvIT). Foreign investors converted their dollars for