Dollar forwards spike on Re crunch

The shortage of rupee liquidity has also affected the foreign exchange market which is seeing a rise in rates for one and two month forward dollars.

According to market dealers, fearing a rupee shortage, most foreign banks are booking dollars in the forward market for nearer term of one to two months.

This is because in case of rupee shortage these dollars could be used for generating the necessary rupee liquidity. This has resulted in an inverted rate structure for forward dollars.

While six-month and one-year forward dollars closed at 1.54 per cent and 1.36 per cent, one and two-month dollars closed at 2.23 per cent and 1.92 per cent, respectively.

Similarly last week, the one-month and two-month forward dollars closed at 2.09 per cent and 1.80 per cent, while six-month and one-year dollars closed at 1.53 per cent and 1.33 per cent, respectively.

There is one more view as well. Some dealers are of the view that dollar is likely to shoot up following continuous depreciation in the euro and pound following slowdown in their respective countries' economic growth rate.

The pressure on rupee liquidity has resulted as the government has clamped down on its expenditure.