Spot rupee remained in a the close range of 46.965 and 46.9525 against the dollar on the back of dollar purchases by the state-run bank and supplies from foreign funds.
Forward premiums went down marginally as call money rates remained stable and low. Rupee opened at 46.965 in the morning and strengthened a bit during the day.
A dealer with a foreign bank said, "Foreign funds have been supplying continuously. However, it is the demand from the state run banks that capped the gain (of rupee)."
Foreign institutional investments in bonds and stocks have declined in recent weeks, but net inflows in May so far remained high at $170.6 million, taking the total in 2001 to $2.29 billion.
The market is expecting some more inflows very soon, said dealers. These include funds from Satyam Computer Services which recently raised $161.9 million through an issue of American depositary shares and telecom group Bharti Enterprises which has obtained foreign equity investment commitments of $460 million.
A section of the dealers believe that the state run banks were working on behalf of the Reserve Bank of India which may not want the rupee to strengthen much.
A forex dealer with a private sector bank said, "The rupee is overvalued by more than two per cent against the greenback and hence the central bank may not want it to appreciate too much."
Rupee became overvalued against the dollar due the strengthening of the greenback against some of the world's major currencies -- euro and yen. According to analysts, rupee is overvalued by more than 2.5 per cent against the American currency.
Forwards premiums at the near end slipped a bit today as the call money rates continued remain below the seven per cent level. The six-month forward ended at an annualised 4.94 per cent compared with Tuesday's closing level of 4.96 per cent.
Rupee is likely to remain stable in the range of 46.95 top 47 against dollar tomorrow as the dealers believe that the dollar supply form the foreign funds and the dollar demand from the state run banks will continue. As the call money rate is expected to dip a bit, forward premiums at the shorter end is likely to go down further.
