The rupee strengthened today against the dollar amidst good supplies. The forward premiums edged up on the back of drop in yields in the US leading to wide interest rate differentials. The rupee closed higher at Rs 47.9450/9500 to a dollar compared with the previous close of Rs 47.9825/9875.
The rupee came under mild pressure and touched Rs 47.9975 levels on the back of slight month-end dollar demand. It opened at around Rs.47.98/99 per dollar. Ample supplies from exporters as also a few corporates, and lack of any follow-up demand saw the Indian unit firm up to close at Rs 47.9450/9500.
Stray month-end dollar demand notwithstanding, forex dealers attributed the strengthening of the rupee to conversion by a couple of companies of foreign currency loans raised by a few firms.
Inflows were also the result of banks unwinding long positions on expectations of abundant dollar supplies on Monday. The forex market will remain closed in Mumbai tomorrow.
The six-months annualised forward premium edged higher, to close at 6.30 per cent as against 6.17 per cent on Wednesday. Similarly, the 12-month forward premiums rose to 5.90 per cent, compared with 5.83 per cent yesterday.
Meanwhile, towards the end of the day, the Reserve Bank of India (RBI) announced that banks can allow their importer and exporter clients to book forward contracts without producing documentary evidence of their exposure. This will enable firms which are almost certain of entering into contracts to hedge such exposures.
A forex dealer with a private sector bank said the central bank was comfortable with the forex reserve levels and the move was yet another liberalisation measure on the forex front that could induce some volatility in the forex markets so as to cool off the bond markets, where the yields had reached unsustainable levels. The dealer said the rupee may steadily depreciate to Rs 48.20 levels, so that exporters find good support.
The market is expected to open on a firmer tone and stay steady at current levels on Monday on the back of ample supplies. Forward premiums should also stay put at current levels.
