Rising time for the rupee

The US trade deficit has widened to $58.3 billion as against a market expectation of around $56 billion.

Globally, the euro has appreciated from 1.3417 to 1.3482 per dollar and the yen has risen from 104.14 per dollar to 103.48.

Tracking the bearish dollar, the spot rupee is expected to appreciate this week.

Market dealers said the depreciation of the dollar would be short lived as the euro and the pound sterling have appreciated substantially and a technical correction is on the cards.

Besides the bearishness on the dollar, increasing capital inflows into the Indian equity markets "" a chunk of which would be channelled into forthcoming public offerings "" is expected to tilt the rupee-dollar exchange rate in favour of the local currency.

In this scenario, the intervention of the Reserve Bank of India (RBI) will be crucial.

Had the US trade deficit data been dollar-bullish, the apex bank would have preferred to keep off the market as the spot rupee would depreciate in tune with the rise in the greenback, said a dealer.

The spot rupee is expected to remain in a wide band of 43.50-75 to a dollar this week.

Forwards seen grooved

Forward dollar premiums would remain in a small groove this week. As an upward trend is foreseen for the rupee, exporters may sell their proceeds at every decline. Any demand from importers in the event of a rupee depreciation will be met through inflows from foreign investors and exporters, said dealers.

They are also of the view that corporates would not come for import covering in the middle of a month.

Recap: The spot rupee remained range-bound last week as every rise in the exchange rate was pulled down by RBI intervention. The central bank, via public sector banks, kept on buying dollars to depreciate the rupee in order to bring down its value on the real effective exchange Rate band.

Postscript

Rakesh Mohan, secretary, department of economic affairs, and RBI governor Y V Reddy, looking at the liquidity situation called for long-term debt issuances to fund infrastructure projects.