US employment data a booster shot

The US non-farm payroll data, which showed 146,000 new jobs being created as against the expectation of 200,000, is likely to be a major rupee booster.

However, statements made by the US Federal Reserve governor Alan Greenspan that "current account gap is not forever" has been supporting the dollar, thus providing the limit to the downside to the dollar globally.

Also, the outcome of the G-7 meeting will be crucial even if the market is sceptical of the real results. According to dealers, China has been only talking of a possible revaluation of the yuan.

If nothing much happens on this score, the pressure will be on other Asian currencies for taking the burden off the euro.

The spot rupee is expected to open in the range of 43.40-43.60 per dollar. If the Asian currencies manage to appreciate post G-7, the rupee will also appreciate and may touch 43.30 per dollar.

The appreciation of the local currency is expected to be well supported by FII inflows.

Softer forwards ahead

The premiums on the forward dollar are expected to mellow this week following the rise in the rupee. Moreover, with every rise in the rupee, exporters are likely to bring in their receivables which will only ease the premiums afresh.

On the other hand, if the dollar continues to appreciate taking cues from the statements made by Greenspan and the base rate hike by the Federal Reserve, importers will rush in to book their payments.

Recap: The spot rupee-dollar exchange rate remained volatile last week.

The 25 basis points hike in the federal funds rate by the US Federal Reserve's open market committee led to the depreciation of the spot rupee, but robust FII inflows and the upgrade by S&P lifted the local currency.

Postscript

Last week was eventful as far as rates go: The US Federal funds rate was up 25 basis points, while closer home, the government raised the EPFO rate from 8.5 per cent to 9.5 per cent with retrospective effect.