Tight run ahead for rupee vs dollar
The rupee is likely to remain in a tight band this week versus the dollar. It could test 48.40 per dollar levels and is likely to be in the band of 48.38-52 this week provided tensions in the Middle East does not flare up.
With the US President George W Bush not being as bellicose as expected, the only worry according to dealers could be the price of oil. If it crosses the $30 per barrel, there could be buying by oil companies.
The postponement of the tensions and also statements coming in from Japan that yen would be sold for the dollar had seen the greenback appreciating among the major currencies such as the yen and the euro. However, as the rupee had not appreciated the same way as the other currencies, it is unlikely to be affected too much with only a marginal rub-on effect.
Long positions were liquidated last week with the result that the dollar position in the market is now short. In case of any untoward developments, the rupee could be affected and is likely to depreciate suddenly.
The Reserve Bank of India (RBI) continues to be active in the forex arena . It is unlikely to allow the rupee to appreciate much. Remittances from exporters/ non-resident Indians and foreign direct investments are expected to continue this week too.
Foreign institutional investor flows into the market could be affected due to divestment hiccups and there could be lower flows into the market.
Importers are generally staying out of the market and this trend is likely to continue.
Forwards seen grooved
Forwards are unlikely to track the rupee and is likely to be in range of 3.95 to 4.30 mark. According to dealers, the RBI is paying (buying in the forwards market mostly in the six-month segment) at present.
The central bank is more active in forwards than in the spot market. This is one way of helping the exporters.
Also, with the call money edging up due to advance tax outflows, forwards are likely to remain above the 4 per cent mark for most of the week.
Three-month forwards, which had gone below the repo rate, are likely to move up slightly to around 5.80. Some of the importers are likely to start paying in.
