The rupee is likely to trade in a range of 47.90-48.05 against the greenback this week. The major factors, which the participants will be on the look out for, are the situation in the Middle East and the action taken by the public sector banks in the market.
Fund inflows are likely to continue this week even as the finance minister had announced a string of measures last week paving the road towards full convertibility of the rupee.
However, dealers and market observers were unanimous over the view that the steps are likely to affect the market over a medium to long term and not in the short term.
In the short term, the inflows are likely to continue. A section of the dealers even felt that the announcements could bring in more inflows into the country as foreign investors favoured investing in countries with lesser restrictions. The public sector bank have been mopping up huge quantities from the market on behalf of the Reserve Bank of India.
Dealers expect that the RBI must have mopped up more than $500 million from the market through public sector banks. However, the unpredictable move of the public sector banks has foxed the market, as it does not have any clue on when they would intervene in the market.
The dollar is under pressure internationally. Both the euro and Yen are strengthening against the greenback. With unemployment figures shooting up in US, the dollar is likely to be under further pressure, dealers said. They expect the trend in the rupee strengthening to continue till the US economy starts showing signs of improvement.
There have been rumours of some good corporate inflows hitting the markets this week, which includes remittances from a telecommunication company. Also, Monday could see bunched-up money hitting the market. Dealers are following a wait and watch policy to see how the public sector banks would act.
There was demand from petrochemical companies last week and this is expected to continue. However, supplies in the market were more than sufficient to take care of this demand. Also supplies from the software companies are continuously hitting the market. Inflows from the foreign institutional investors in the market have also started trickling in with the new year.
Forwards in a slot
Both the six-month and one-year forwards are likely to remain in the same range during the week. The six-month forwards are likely to be in a range of 3.3-3.60, while the one-year forwards will be in a range of 3.11- 3.25.
The premiums in the shorter duration for 15 days period to one-month had shown a slight upward trend in the last week because of higher rates in the call money market. Dealers said that there was paying-in pressure in the shorter term.
