Oil firms amassing forward dollars

Oil companies were seen buying forward dollars on a continued basis with every appreciation of rupee to cut down on the volatility in the import payments arising out of the oil prices.

According to dealers, even though oil prices are moderating, the oil companies do not want to leave any opportunity to book dollars for import payment at every rise in rupee-dollar exchange rate. Usually, oil companies wait for the month end to make the import payments.

Therefore, even as the spot rupee opened at 43.85, it moved up to 43.75 but came down to close a shade lower at 43.76/77 to a dollar.

According to a dealer, the move has the Reserve Bank of India backing which is curtailing the dollar outflows on account of import payments. In fact, he added, the RBI has been relatively flexible in allowing the rupee to appreciate on the back of inflows so as to control inflation and reduce import payments.

While the six-month forward dollars tracked soft at 1.62 per cent as against 1.96 per cent on Wednesday, one-year dollars closed higher at 1.27 per cent as against 0.44 per cent.

"Even if there was demand, oil companies have been buying continuously without causing volatility in the market and supply is in excess to take care of the demand," said a dealer.

On the other hand, the government securities rallied on the back of a government statement that there is net credit parked with its account with the RBI and therefore there might not be any need for auction which is scheduled in January.

Prices in the long and medium-term papers went up by 70 paise whereas short-term rallied by 30-40 paise. The benchmark paper 7.38 per cent 2015 closed at 6.55 per cent as against a close of 6.62 per cent on Wednesday.

Dalers said if the auction is cancelled, the benchmark paper might even reach 6.25 per cent.