The rupee turned volatile against the US dollar today on the back of longer-than-usual weekend ahead. The Indian currency closed at 48.050/055 today as against yesterday's closing of 47.9850/9875.
The forex market is closed on Wednesday and Friday on account of the Diwali festival. Forward premiums went up on expectations of a government paper auction announcement.
The Indian unit opened slightly over the 48-mark. The currency was traded in a very thin range for the next couple of hours. However, the State Bank of India bought huge amounts of dollars in the early afternoon, which pushed the Indian unit down to 48.07 level. The situation improved in the dying hours, as the market received supply from some nationalised banks.
Said a dealer with a private sector bank: "The currency was weak since morning due to long weekend ahead. However, the situation turned a bit scary as SBI bought from the market."
Dealers said that, once the rupee touched the 48.07 mark, even the SBI was seen selling dollars.
"It is difficult to say whether the last-minute selling by the nationalised banks was on behalf of the Reserve Bank of India (RBI). We have information that some exporters' dollar supply reached at the very last moment," said a dealer with a foreign bank.
Forward premiums continued to rise today. A dealer with a nationalised bank said: "Primarily, the market is expecting an auction of government paper. Secondly, the market also expects that the US Fed will cut its benchmark rate once again and this has kept forward premiums upwardly biased."
The six-month premium closed at 6.47 per cent today as against yesterday's closing of 6.41 per cent. The 12-month premium ended the day at 6.26 per cent as compared with yesterday's closing of 6.22 per cent.
On Thursday, the spot rupee is likely to remain around the Rs 48-mark amidst low volumes as most of the settlements for the week have already been done. Forward premiums are likely to remain stable with an upward bias.
