FOREX MARKET
The rupee is expected to once again come under pressure this week as the nervous sentiment caused by the rupees 18 paise dip last week persists. Market players see the rupee moving in the range of 36.45 and 36.65 against the dollar.
Forward premiums are not likely to rise much over the seven per cent mark, given that local interest rates are low.
Monday morning, the spot rupee may open low around last Fridays closing levels of 36.53-54. Any signs of corporate demand may put pressure on the rupee resulting in strong intra-day swings. The RBI might make its presence felt in the market more aggressively than last week by issuing statements. However, as the RBI has indicated, it is not likely to intervene unless the market gets overheated.
The nervousness in the market is an off-shoot of the arbitraging by large banks between the local and overseas currency markets last week. State Bank of India, Bank of Baroda and other public sector and foreign banks are using surplus rupees to buy dollars from the spot market.
This is adding to the pressure on the rupee. On the back of this, the government announced the deferment of the GAIL GDR issue which sent the market into a tizzy, resulting in the rupee closing 18 paise lower at 36.54 on Friday evening after opening at 36.36 on Monday morning.
While the forward market will continue to be nervous, premiums are seen bottoming out at seven per cent.
The pressure in the forward market is overdone considering that rates prevailing in the local market are quite low. Hence, we might see rates bottoming out at these levels and then easing as receivers come into market to get the best rates available, a market player said.
However, the dealer added that any bad news on the Indian economy, such as the stock markets remaining bearish, could impact the dollar-rupee parity.
However, the absence of any such development combined with RBI intervention could see some sanity return to the market as the week progresses.
