Rupee seen rangebound

OUTLOOK/ CURRENCY

The spot rupee is expected to rule in the 44.90-45.50 range this week and the market will remain volatile.

While dollar sales by exporters will help the rupee appreciate further, lack of foreign exchange inflows and dollar appreciation overseas may lead to a slide in the rupee, said dealers.

There is a feeling that with the rupee expected to stabilise around these levels, exporters' rush to sell dollars and book receivable is likely to slowdown.

Globally the dollar continues to gradually appreciate against currencies such as the pound and euro, and this equation appears to be leading to a steady rise in the rupee.

On the domestic front things look fine in terms of economic fundamentals and expedite reforms on the external front. But the political scenario seems to be a major dampener. The dollar may start gaining as most of the economic data have been favourable.

Foreign exchange reserves as on May 14 grew by a mere $49 million in a week's time to $118.628 billion . During the last few weeks, exporters have been booking receivables in the forward market whenever the rupee depreciated against the dollar.

However, last week demand from corporate importers cropped up for making payments which only destabilised the spot market.

Bankers feel that with the rupee stabilising at around 45-45.50, the panic reaction will come down and the volatility to that extent will also reduce.

Moreover, they feel this will lead to some covering of import payments in the near-term.

Forwards $ seen at a discount

The forward dollar movements will be contingent upon forex supplies in the spot market. Dealers feel that if there are good supplies in the spot forex market and the rupee appreciates, exporters will rush to realise their receivables. This will in turn push forward dollars into a discount.

However, the discount on dollars is expected to come down as dealers feel there could be some importer demand for covering payment obligations.

This is because there is a view that though the spot rupee is expected to stabilise after the formation of new government at the Centre, it will be with a depreciating bias.

With the pressure on the rupee, exporters will rush to book receivables at every attractive levels. This may push forward dollars into a discount. Importer coverings will increase with the approaching month-end.

While action is concentrated in spot, the cash dollar shortage in the forward markets is impacting forward dollars to slip into a discount. The discount was further aggravated by exporters booking their receivables whenever the dollar appreciates.