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Re Seen Ruling In 42.20-70 Groove

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FOREX Market

The rupee is expected to hold steady this week on stable corporate sentiment and receding political tensions, dealers said.

Spot rupee is seen between 42.20 and 42.70 with trade remaining mostly quiet. Forward rupee will also strengthen, particularly if the State Bank of India (SBI) continues its forward dollar sales. The six month annualised premium should range between nine and eleven percent.

"Basic corporate sentiment is stable," a private bank dealer said. This would keep the rupee from straying far beyond the expected range, he added. However, dealers said that corporate buying or selling would pick up on dips or peaks in the exchange rate.

 

Inter-bank trade is expected to continue as normal. The RBI preference for lower arbitrage has affected trade in very near term maturities but dealing in spot and forward maturities was left relatively unaffected, dealers said.

Political pressures which could send the rupee tumbling beyond the 43 mark have temporarily abated with the AIADMK saying it would continue to support the government on Saturday.

The forward rupee could also firm up if the SBI continues to receive, dealers said. "It was continuously supporting the forward rupee last week," one private bank dealer said.

"With spot rupee showing a tendency to weaken and the forward rupee tracking the spot last week, the authorities may want to keep the dollar premiums in check," another dealer added. He said SBI's activities like intervention in the forward market seemed to be on behalf of the central bank.

Corporates are not unduly concerned about the present status of the rupee as most of them are well covered, dealers said.

"We are only advising corporates with substantial uncovered exposure to buy the forward cover on dips in the premiums, and are asking exporters to sell their holdings on peaks," a dealer said.

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First Published: Jul 06 1998 | 12:00 AM IST

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