The rupee traded in a narrow range of 47.8175-83 amid heavy dollar-buying by state-run banks, while the forward premiums rose by 10-15 basis points across all maturities on the back of high call money rates and government paper yields.
The rupee opened between 47.8250 and 47.8350 and strengthened at 47.8175 level due to good dollar supplies from exporters and remittances from abroad. However, at that level, state-run banks, led by State Bank of India and Bank of India bought dollars and pushed down the rupee.
Dealers said the rupee could have appreciated till 47.78 without the dollar buying by state-run banks. They suspected that public banks were buying on behalf of the Reserve Bank of India.
A dealer with a private sector bank, "It seems that the RBI did not want the rupee to appreciate over the 47.80 mark and hence has mopped up the greenback through state-run banks."
According to money market dealers, public sector banks bought around $100 million worth of greenback from today.
Forward premiums rose as call money rates zoomed. The 6-month annnualised premium closed at 6.45 per cent compared with yesterday's close 6.30 per cent, while the 1-year premium ended at 6.15 per cent compared with yesterday's close of 6.01 per cent.
A dealer with a foreign bank said, "Two factors caused the premiums to go up. First, it is the upsurge in the yields of government securities and overnight money rates. Secondly, the market is expecting the US Federal Reserve to cut Fed rate."
The rupee may remain stable tomorrow at the 47.80 mark. Dealers said its movement will largely be governed by the public sector banks' activity in the market.
Forward premiums will depend on the US Federal Reserve's decision on Fed rate. According to market players, the premiums will remain stable if the Fed declines to cut the rate.
