Mint St mood, inflows, bourses key to rupee

Outlook/ Currency

 The rupee ended on Friday at 45.34/35 against the dollar as against the close of 45.3850/3950 on October 10.

 The rupee dipped against the dollar on Tuesday and Wednesday. On October 14 it had opened at 45.42/43 against the dollar and closed at 45.69/71.

 Dealers attribute the fall to the unwinding of long positions and a shortage of dollars in the market. There were also some corporate demand in the market.

 However there has been strong foreign investment inflows (FII) into the market of around $500 million into the market this week which took the rupee again.

 However the RBI had intervened in the markets on Thursday and Friday and sucked out excess dollars from the market.

 The RBI has been continuously doing this for some time now as was seen by the accretion of inflows of over $2.6 billion in the week ended October 10.

 The euro went below the 1.6 mark against the dollar on Friday. However dealers feel that even if the dollar appreciated against the other currencies the same may not be true for the rupee. The rupee is unlikely to depreciate against the greenback.

 With Diwali at the end of the week, dealers feel that there would be lower corporate activity in the market. However they expect the FII inflows in the market to continue at the same pace this week too.

 According to dealers if cash dollars is at a discount then the rupee may not appreciate. If cash discount goes up then rupee may go up to 45.40. The market will also have to look at the problem of dollar shortage in the market.

 If the rupee appreciates, it may test the 45.25 mark against the dollar. The RBI is expected to intervene in the market this week too.

 Forward premiums

 Dealers expect the volatility in the forward markets to continue the coming week too.

 The six months premium closed at 0.10 percent from the previous while the one year premium closed at 0.25 per cent.

 According to dealers the dollar inflows had almost wiped away discounts on the forward dollar, except for some near maturities.

 Forwards up to February was dealt at a discount. If the shortage of dollars continue in the market, the one year forward may also go in for a discount.