The rupee remained in a narrow range of 47.91 /92 to 47.94/95 amid dollar inflows through remittances and dollar buying by state-run banks. Forward premiums moved up a bit with interest rates falling at a faster rate in the US.
The spot opened at 47.94/95 and strengthened to touch the day's high of 47.91/92. The currency, however, weakened later on to close at its opening level. Dealers said that public sector banks bought dollars in the noon.
A dealer with a foreign bank said: "All the banks were buying dollars in the morning. But as the rupee approached the 47.90 mark, state-run banks led by the State Bank of India (SBI) bought around $50-75 million which pushed down the rupee." Dealers suspect the buying was on behalf of the Reserve Bank of India.
In the forward market, as the money market interest rate little changed and US interest rate continued to fall, premiums rose a bit. The six-month annualised forward premium today closed at 6.35 per cent against Thursday's closing of 6.30 per cent. The 12-month forward premium closed at 6.15 per cent up from Thursday's close of 5.90 per cent.
A dealer with a private bank said: "There was no panic in the forward market. As the interest rate differential widened a bit today, premiums rose a bit."
The rupee is likely to remain stable around 47.90 to 47.95 tomorrow. Dealers are expecting dollar remittances to continue, but the movement of the rupee will largely depend upon the state-run banks' activity as well.
The treasury head of a private bank said: "The rupee could breach the 47.90 mark today, but for the buying by the state-run banks. Tomorrow's high and low of the rupee depends upon at what level the banks will intervene and how much they will buy from the market."
Forward premium will remain stable with a northward bias as the money market yields will remain stable on the back of today's auction announcement.
