Re to rise anew, but all eyes on Middle East
The rupee is expected to appreciate afresh this week and is seen hovering in the 48.30-36 band per dollar. But developments in the Middle East have the capacity to upset the applecart.
The New York markets are closed on Monday, while the Indian markets are closed on Tuesday. Major cash demand is unlikely therefore on Monday. There could be some bunched up effect of the weekend on Monday, and also on Wednesday.
The Reserve Bank of India (RBI) is seen continuing to keep a tight leash on the rupee. It is likely to try and protect the 48.32 level. However, once this is breached, the rupee is expected to touch the 48.30 mark.
Dealers expect state-owned banks to buy aggressively at this level and not allow the rupee to appreciate beyond the current point, at least for the moment.
There has been heavy dollar buying by the RBI in the last two weeks. Dealers said public banks had mopped around $80 million on Friday and for the whole of last week, they could have garnered more than $300 million. In the week ended October 4, forex reserves had gone up by more than $500 million.
Exporter dollars are still seen coming in along with remittances from non-resident Indians. Foreign institutional investor (FII) inflows are seen trickling back. Dealers said there were good FII inflows into the bourses in the last three days of last week.
They feel that this trend is likely to continue this week too. Players are keeping a tab on the Middle East crisis. If the situation worsens there, oil prices could flare up, which could impact the rupee negatively.
Forwards
Forwards are seen tracking the rupee and is likely to hover below the four per cent mark. Exporters are still seen covering for their receivables as they feel the sentiment on the rupee is still bullish.
Players are also expecting a bank rate cut and a repo rate cut in the forthcoming Monetary & Credit Policy, slated to be announced on October 29.
The repo rate cut seems to have been factored in as both the six months and one year premiums are seen weakening. The six-months forward premium, which closed below the 4 per cent mark, is likely to see a range of 3.75 per cent to 4 per cent, while one-year forward premium is presaged in a range of 3.80 per cent to 4 per cent.
