The spot rupee hovered in a range between 48.71 and 48.72 today. Forward premiums dipped marginally due to the fall in government paper yields across maturities.
The Indian currency opened at 48.71/72 and ended the day at 48.7100/7150. A dealer with a foreign bank said: "There was a continuous inflow of dollars in the market. But state-run banks were buying dollars at 48.71 levels and this led to the currency closing at that level."
Dealers said the dollar supply was mainly on account of foreign investment inflows. They suspect the dollar-buying by state-run banks was on behalf of the Reserve Bank of India (RBI).
"The RBI has been mopping up dollars from the market through public sector banks for some time and today's purchases also seem to be dictated by the apex bank," said a dealer with a private sector bank.
The fall in government paper yields translated in a fall in premiums. The 6-month annualised premium closed at 6.20 per cent today as against Wednesday's closing of 6.30 per cent. The one-year forward premium dipped by 10 basis points to end the day at 5.35 per cent.
The spot rupee is likely to be traded in a thin range of 48.70 to 48.80 next week. Dealers said public sector banks have been buying or selling dollars so as to keep the Indian unit in that range and, hence, whatever the flow of dollars, the rupee will stay in that band against the greenback.
Forward premiums are expected to go down next week as government security yields are likely to move southward. However, as call money rates are likely to remain high due to the advance tax outflow, a sharp fall in the premiums is unlikely, forex dealers said.
