The spot rupee is expected to trade in the 48.70-80 range against the US dollar this week. There will be some good foreign exchange inflows into the country in the next few weeks as foreign institutional investors (FIIs) and exporters will find it lucrative to convert dollars into rupees. Forward premiums are likely to soften due to the easy liquidity conditions expected in the call money market.
"The Reserve Bank of India (RBI) governor Bimal Jalan's statement on Friday that the RBI was buying dollars in a major way to boost the foreign exchange reserves and that the central bank was not targetting a specific level for the rupee could be read to mean that the rupee could depreciate by 5 to 10 paise in the coming week," said a dealer with a private sector bank.
The reiteration of a softer interest rate regime by the governor, coupled with the easy money market rates, should see forward premiums dip further.
A dealer pointed out that there should be no real cause for concern about the rupee depreciating vis-a-vis the dollar as, historically, it (the rupee) has weakened by six per cent annually. In April 2001, the rupee was hovering around 46.65 to a dollar while in February 2002, it touched the 48.70 levels. This works out to a depreciation of 4.39 per cent in the last 10-plus months.
"The FIIs normally make their individual country investment allocations in January and February. At the current levels for the dollar/rupee exchange rate, the FIIs as well as the exporters can realise more rupees if they sell their dollars," said another dealer. "Importers should not hesitate to cover (hedge) their near forward requirements while exporters should sell their dollars in the far forward segment," the dealer suggested.
The Indian rupee slipped to a new all-time closing low of 48.70/71 to a dollar on Friday compared with Thursday's close of 48.6800/6900 on the back of banks' dollar-buying interest. The rupee hit the intra-day low of 48.7550/7650 on Thursday.
