FOREX MARKET
The rupee may come under downward pressure against the dollar this week as the Asian economic crisis _ which has had a moderate impact on India in the last one year _ looks poised to enter a third phase. Cautious corporates will hedge at least their near-term liabilities, dealers said on Saturday.
Spot rupee is expected to range between 42.65 and 42.75 per dollar, with the central bank intervening to support the rupee if it falls beyond 42.75.
Forward dollar premiums may stiffen towards 7.5 to 8.0 percent for six months. A fresh wave of political instability _ with the Akali Dal and Samata Party threatening to withdraw support from the BJP-led coalition at the Centre _ may fuel nervousness. But the focus will be on the Asian markets, dealers said.
Pressures in the region built up last week as speculators attacked the Hong Kong dollar and Chinese yuan, the former considered to be a pillar of strength in the region during the earlier phases of the Asian crisis.
Also, with Japan not expected to come out of its recession this year, speculators expect the yen to crash to 150 per dollar from Friday's low of 145.7. Expectations of these currencies crumpling sent regional markets tumbling.
Tremors were felt at home and nervous Indian corporates sought cover. The rupee ended Friday at 42.60-62 against 42.48-50 on Thursday. Dealers said the market would be largely dominated by buyers this week. Foreign institutional investors were repatriating funds again, they said. Besides, exporters were holding on to their proceeds, they said.
But, they added, since corporates were fairly well covered, unfavourable developments would not cause a free fall of the Indian unit in the near term.
They said they widely expected the central bank to use proceeds from the State Bank of India's (SBI) Resurgent India Bonds (RIB) scheme to support the rupee if required. Some said they felt the inflows by themselves would ease pressures on the rupee.
