The rupee is likely to continue its streak of appreciation and will trade in a range of 47.10-25 against the dollar.
Dealers are however on the lookout on whether the Reserve Bank of India (RBI) will intervene in these markets and stop the rupee from appreciation.
After keeping a tight leash on the rupee for the last four weeks at around the 47.35 mark the RBI finally allowed the rupee to appreciate.
The rupee closed at 47.1850/1950 after touching a new 20-1/2 month peak of 47.18 against the US currency.
The rupee has appreciated by 16 paise in the last one week. The rupee had opened at 47.33/34 on May 5. The RBI had allowed the rupee to break both the 47.25 and 47.20 mark this week.
The trend of the RBI was normally to hold one particular level for some time before allowing the rupee to appreciate more.
The euro was trading close to its highest in more than four years against the dollar this week. It closed on Friday at 1.485 against the dollar as against the previous weeks close of 1.1228.
The ECB had left unchanged its benchmark rate at 2.5 per cent. Also there is no encouraging news coming out from the US as the economy is not picking up even after the war in Iraq is over.
There had been good corporate inflows into the system. On the back of the crash in forwards corporates and information technology companies are continuously selling their dollars.
There has also been foreign institutional investor inflows into the system the last week. This trend is likely to continue this week too.
The movement of the rupee would however be dependent on when the RBI would intervene in the market.
However, the general expectation is that rupee would appreciate more and touch the 47 mark before the end of this month.
Forwards
Forwards had again touched all time lows last week.
The six-month forward premiums crashed had to lifetime lows of 1 per cent and one year forwards crashed to 1.10 per cent as exporters encashed their forward receivables fearing that the rupee will strengthen further. Also banks have also been doing buy-sell swaps in the market.
There is a feeling that RBI could intervene in the market and start paying in. In this case corporates would then start covering at least part of their exposures. The forwards are likely to be in a range of 1-1.5 per cent this week.
